Net profit falling below

Domino’s is well known when it comes to fast food and pizza, although Domino’s Pizza Enterprises had a mixed financial year, which shows a challenging picture in front of its international markets, such as Japan and France. We can see that there is growth in their sales, even in earnings, despite the net profit falling below the expected range, which led to stock price decline.

Food empire of Domino’s

Domino’s investors opening the yearly results are having a tough time digesting the cold, soggy returns.

The opening year of 2024 has not been kind to Domino’s investors as the food empire of Domino’s in Asia has been struggling to hold its ground due to the falling share prices. To understand this better, let’s look at each case of Domino’s in detail and explore why it happened.

American brands in their regions

First proceeding to be geopolitical issues in Malaysia

This was caused by the Israel-Palestine crisis. The tensions surrounding the war between Israel and Palestine have made Malaysia reject American brands in their regions because of the Middle East, as most regions controlled by or influenced by the Middle East have declined using American brands and their products as Malaysia is fully in state religion which is Islam.

Anti-US sentiments in the region of Japan

The majority of customers in Malaysia are rejecting the brand. This has caused Domino’s a lot of lost revenue, as most stores are unable to earn as much money as they used to. This weakening grasp of Domino’s in Malaysia and other pro-Palestine regions has also affected sales in Japan. Due to anti-US sentiments in the region of Japan, even Domino’s Pizza sales are declining.

Although there are other minor details to it as Japan’s sentiment of thought toward premium food has changed a lot at first, it was seen as more premium, but it has become an everyday fast item.

The share market is a complex endeavor

The second most complex phenomenon is underperformance in the share market. Underperformance in the share market is caused by many reasons, as the share market is a complex endeavor. The first reason is the New Zealand case where the former owner of Domino’s franchise was exploiting migrant workers, which affected the brand’s reputation in the country as well.

Due to excessive store culling in Japan and other places, such as France, where Domino’s closes its underperforming stores quickly, this has led to the decline of stock prices.

In the share market

Though this may look bad on the surface, Domino’s has shown that it is working back to a better place in the share market. Many analysts are quite confident in the brand, believing that it will soon perform well in the share market. Not to mention, in China, Domino’s has been performing quite well and has the largest share (46%) among all American brands operating in China. This is quite significant when compared to the second-largest brand, which has a market share of 26%.

Domino’s might collapse

Which is Little Caesar, and finally, in 2024, can we set it to be the end of the pandemic? Mostly, this is why the sales of pizza and fast food would decline, as more people are going to offices or going outside more. The peak of fast food consumption was in 2021, which was also the peak of sales for most fast food brands. That is why a little slowness in market growth is to be expected.

Moreover, due to current geopolitical and various other reasons, it is definitely not a reason to say that Domino’s might collapse. Finally, they have started to implement methods for cost savings and profitability through their different savings programs, which they have increased.

Their global sales growth

Their store profitability increased by 6%, and earnings grew by 3%. Their global sales growth has reached 4.6%, and online sales have improved to 7%. The new regional performance, such as Australia, New Zealand, and some parts of Europe, is showing strong growth.

While some agent places are facing challenges, as we have already discussed, Domino’s CEO has put out a statement that they are working on methods to improve their profitability.

Improving their products and sales

The company is putting effort into enhancing their profitability through cost actions and increasing sales leverage. Especially, they are contributing towards more innovation, such as online orders for new product launches like pizza hot dogs in Australia. They’re optimistic about improving their products and sales. However, they are still struggling, and some analysts predict that the financial year of 2025 will be challenging for Domino’s Pizza.

REFERENCE

Jackson, B. (2024, August 21). ‘Terrible year’: Domino’s financials fall flat. News. https://www.news.com.au/finance/business/dominos-financials-underwhelm-market-bevy-of-issues-in-global-franchisor/news-story/5630c6bdda257faa4a75d263eaf03038

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