Domino’s has its digitals in the pie

Eli Greenblat
February 16, 2012
The Age

Domino’s chief Don Meij: ‘The best-value meal solution bar none in Australia, New Zealand and Europe.’

DOMINO’S Pizza wants to harness greater productivity and fatter margins gained from customers’ growing use of mobile devices.

It aims to transform into a fully digital business as well as counter rising labour costs and commodity prices, particularly cheese and meat.

Sizzling enthusiasm among Australian and New Zealand customers for ordering and tracking their pizza orders from hand-held devices such as iPhones and iPads has resulted in average order sizes increasing and has led Domino’s to upgrade its earnings growth for this financial year by about 20 per cent.

Chief executive Don Meij told The Age yesterday that Domino’s was migrating to a pure digital environment with an ambitious target of 50 per cent of all local sales originating from mobile devices and online by the middle of the year, up from a third at present. By 2016 it expects 80 per cent of pizza sales to originate online.

Mr Meij said this was bolstering margins and profits in the face of steeper input costs such as labour and key pizza ingredients.

”Digital is making us more efficient,” he said. ”People spend more with us when they buy online, we make less mistakes because they put in their own order. We can communicate more clearly with them because we can now start to build a one-on-one relationship with them.”

Domino’s digital strategy – including the launch of its own Android app in September and greater use of social media sites – helped it lift store network sales by 10 per cent to $401.1 million for the first half of 2011-12 as group revenue rose 9.6 per cent to $132.5 million.

Same-store sales growth was 8.4 per cent against 9.1 growth in the corresponding period last year.

Its 563 Australian and New Zealand stores had same-store sales growth of 8.7 per cent while its 326 European outlets (Netherlands, Belgium and France) had sales growth of 7.5 per cent.

Net profit rose 23 per cent to $12.6 million, allowing Domino’s to lift its dividend by 25 per cent to 13¢ a share, payable on March 12.

Despite challenges from labour costs and a tough macroeconomic environment, Domino’s believes its momentum from the first half will continue into 2012. ”We are therefore upgrading our EBITDA [earnings before interest, tax, depreciation and amortisation] and net-profit-after-tax growth for the 2012 full year to be in the region of 20 per cent,” Mr Meij said.

The upgrade sent Domino’s shares 6.4 per cent higher to end up 46¢ at $7.70.

Mr Meij said that although consumers were eating out less, they were visiting Domino’s more often, increasing their order sizes and typically buying more side dishes such as ice-cream and garlic bread.

”Relative to anything else in the marketplace, Domino’s is the best-value meal solution bar none in Australia, New Zealand and Europe,” he said.

But, Mr Meij said, the price of cheese and meat was increasing and labour costs were ”skyrocketing”.

Read more