Domino's sees potential hit to pizza sales despite stay-at-home orders
Domino’s Australia has warned investors of a potential decline in short-term sales due to significant fluctuations in trade across its 825 Australian and New Zealand stores, disappointing hopes it would become one of the big winners of the coronavirus shutdown.
Chief executive Don Meij told shareholders on Friday not to expect booming sales growth over the coronavirus shutdown, saying the company viewed the virus as a time to "do good rather than do well". Domino's shares slumped 5.5 per cent shortly before midday as the wider sharemarket posted modest gains.
Domino's CEO Don Meij says the company is focused on "doing good, not doing well".Credit:Chris Hyde
"We intend to emerge from this time with a strong, sustainable franchisee network that our customers recognise as an important part of their communities", Mr Meij said.
The $4 billion pizza seller had been picked by market watchers as a potential beneficiary of the widespread coronavirus restaurant shutdowns and the government's stay-at-home orders which have forced more consumers to order food online.
Domino's said while trade throughout the coronavirus had been consistent, changes in consumer purchasing habits could hit sales in the short-term.
Stores closer to universities, in holiday locations or in cities’ CBDs have all experienced a fall in trade, the company warned, though this has been somewhat offset by other stores which have seen a jump in sales.
Due to these fluctuations, Domino’s has been required to pay out a higher level of franchisee support payments than it would in a usual period "where sales growth is more evenly distributed across the business".
"We are focused on helping our stores respond to changed trading conditions; guiding some stores on how to manage increased order volumes while maintaining social distancing, as well as providing tangible support to those stores that are seeing near-term declines specific to their local markets," Mr Meij said.
Domino’s has also invested more in advertising and relaxed debtor payments for franchisees during the virus period.
The company's shares fell 5.5 per cent to $46.89 following the trading update even as the wider ASX 200 advanced, widening its 10.7 per cent loss in market value since the beginning of the year. However, Domino's is still outperforming the broader ASX 200, which is down 21.8 per cent over the same period.
Trade in the pizza seller's shut-down international markets has started to resume, with 70 per cent of outlets in France now open. Japanese and German stores have continued to trade strongly, the company said. In New Zealand, it plans to reopen its stores by April 28, when stage four restrictions are lifted.
While Domino’s does not offer any fixed short-term profit or sales forecasts, the company made sure to withdraw "any previous statement which might be construed as earnings guidance for the current financial year".
Its medium-term target to grow comparable sales by 3 per cent to 6 per cent and open 7 per cent to 9 per cent more new stores was maintained, though Domino's tempered expectations it would open any new stores soon during the pandemic.