Domino’s Pizza has recorded its first loss in 20 years as it moves to shut hundreds of under-performing stores worldwide.
The fast food giant posted a $22.2 million loss for its half-year results for the six months to December 31, despite making a healthy $58 million profit for the same period last year.
In a trading update, new chief executive Mark van Dyk – who took over in November – said Domino’s would recoup its fledgling profit margin by closing 205 stores, mostly in Japan.
Despite tough operating conditions across Asia and Europe, particularly Japan and France, van Dyk said the popular pizza chain is doing well in Australia.
Sales growth in Australia remained steady, with an earnings before interest and taxes growth of 7.6 per cent to $67.7 million for the period.
The new chief executive has been busy shuttering poorly-performing stores since he took the job four months ago.
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He said the sweeping closures and a move to simplify ingredients and packaging would deliver $18.6 million in annualised cost savings.
“Our recent decision to close 205 loss-making stores, including 172 in Japan, should demonstrate we will take the steps we need to provide the venture capital to reinvest in sustainable, long-term growth,” van Dyk said.
“Domino’s operates in a resilient global pizza market with significant growth potential and we will continue to share our plans to reach that potential with our franchise partners and shareholders in the months ahead.”
Van Dyk said his vision for bringing Domino’s back into the black involved simplifying its pizza offering.
“To reach our long-term potential we must deliver a simpler, more consistent Domino’s,” he said.
Despite mass closures, Domino’s said it still plans to open new stores in profitable markets.
There are 3700 Domino’s stores across the network, including 729 in Australia.
Domino’s shares dropped more than 10 per cent to $28.77 today following the half-year results.
