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- Domino's experienced sales dip
US chain Domino's has blamed a dip in sales on its Australian operations after the pizza giant ditched its promotions and discounts.
The company suffered lower than expected second-quarter earnings in the US overnight, with Domino's US chief financial officer Sandeep Reddy specifically calling out its Australian franchisee Domino's Pizza Enterprises.
'Comp sales declined by 0.1 per cent in the quarter as they continued to be impacted by Domino's Pizza Enterprises,' he said.
'They remain focused on turning their business around. We continue to work closely with them on that.'
Mr Reddy explained in a briefing call to US investors and analysts that some decisions made by Australian management had been a drag on the company as a whole, specifically the abandonment of promotions and discounts.
Domino's Pizza Enterprises executive chairman Jack Cowin decided in August last year to ditch the campaign around the world in favour of an everyday low-price model used by the likes of companies such as Bunnings.
The move had a devastating impact, with the company losing one in 10 customers.
'Domino's Pizza Enterprises was definitely a drag on our same-store sales because their performance continued to be impacted by the approach that their management have already talked about, which is they've actively decided to actually reduce the lower margin transactions,' Mr Reddy said.
'As a result of that, they've actually had a reduction in order counts where the ticket increase has not been able to compensate it.
'That same-store sales drag that they've experienced impacts us pretty materially. That's the other driver that I would say is embedded in the numbers.'
Domino's Pizza Inc chief executive Russell Weiner said on the earnings call he remains hopeful that the embattled operations would turn around.
'It's important for folks to remember that with Domino's Pizza Enterprises, yes, there are some struggles going on right now and some of them are purposeful, resetting kind of the profit piece here,' he said.
'But they are the number one pizza player in the majority of their markets. They are coming back from a position of strength.'
Mr Weiner also looks forward to former McDonald's Australia chief executive Andrew Gregory taking over the helm of the Australian operations next month.
'He's got 30 years in the restaurant business, majority of those with McDonald's,' he told US investors.
'What we're going to be focusing on is, like Sandeep said, there's been an initial kind of reboot on the profit side at the expense of orders.
'We think, I think they think as well, now we need to go in with the right kind of value to recapture order counts.'
Mr Cowin, who is also the founder of Hungry Jacks, has previously defended the shift to an everyday low price model, insisting that the decision was 'paying off'.
'The objective was can we make more money for the franchisees at the store level... and that has positively worked,' Cowin told The Nightly earlier this year.
'You lose the people that will only go if they get a super heavy discount, they're price driven... but we're not making any money on those so it doesn't really impact the company.'
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