Domino’s Pizza will reduce its workforce by 200 people in an effort to restructure amid lower sales and a plunge in net income as the business feels the pang of inflation.
“We expect a number of staff in our support offices in Australia and internationally to leave our business in the coming months after we work through local consultation requirements. We intend to support our team members as best as we can through this process,” Domino’s Pizza CEO and Managing Director Don Meij said on Aug. 23.
The popular pizza chain has already taken steps to reduce operating costs such as exiting the Danish market, shutting down underperforming stores, accelerating the refranchising of others, and streamlining operations.
The company expects the initiatives to result in network savings of $50-$60 million in fiscal 2024 and $80-$94 million in 2025. It plans to reinvest about one-third of the savings into the franchisee network.
The company, however, suffered a 74.4 percent decline in net profit to $40.6 million.
“Because of the speed at which we needed to respond to inflation, we didn’t always get the ‘value equation’ right. For example, some of the changes we made including the introduction of a delivery service fee [which] did not resonate with some customers, and over time they ordered less frequently,” Mr. Meij said.
Mr. Meij noted that the company has now removed the majority of the fees and is now actively working on rebalancing the value equation. The chief executive added that Domino’s Pizza stores are not expected to pass on pricing increases to customers this year.
The company’s board declared an unfranked final dividend of 42.6 cents per share for fiscal 2023.
Inflation Remains High
According to the Australian Business Statistics (ABS), the consumer price index rose by 0.8 percent in the June quarter and by 6.0 percent over the 12 months to the quarter. Food prices during the quarter climbed by 1.6 percent.“This is the first time since September 2021 that services inflation has been higher than goods, highlighting the change from 12 months ago when goods like new dwellings and automotive fuel were driving inflation. Now price increases for a range of services like rents, restaurant meals, child-care and insurance are keeping inflation high,” ABS head of prices statistics Michelle Marquardt said.
The RBA maintained the cash rate unchanged at 4.1 percent, and the interest rate on Exchange Settlement balances at 4 percent, noting that “recent information on inflation had been encouraging, the economy was expected to grow only slowly over the period ahead and this would help with the further moderation of inflation.”
