Domino's gets Japan back on track, ramps up new stores

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Domino's Pizza says its has reversed its falling sales in Japan and is on track to open up to 200 new stores worldwide this financial year.

The company told investors at its annual general meeting on Wednesday that it grew Australian and New Zealand same-store sales (which strips out the impact of opening or closing stores) by 4.4 per cent in the first 17 weeks of the 2018 financial year.

Sales in Europe grew 8.5 per cent, and they stopped going backwards in Japan, where they edged up 0.1 per cent after falling 0.6 per cent last financial year.

The company said its performance in Japan, where it recently bought out its joint venture partner, was improved through menu enhancements, new products, simpler prices and by targeting single consumers.

Same-store sales worldwide increased by 5 per cent.

Domino's said it had opened 32 new stores so far this financial year, and expected to open another 180 to 200 new stores by the end of the year. That was in addition to the 170 stores added with the purchase of the Hallo Pizza chain in Germany. That could bring total store numbers to more than 2500.

Domino's affirmed guidance for Australian and New Zealand same-store sales growth of 7 to 9 per cent and between 0 and 2 per cent in Japan, and upgraded its guidance for Europe to 6 to 8 per cent from 5 to 7 per cent. It also affirmed guidance for its net profit to grow by about 20 per cent.

Investors savaged Domino's after its full year results in August, when it missed its profit guidance.

'EBA talk underway'

The Fair Work Commission last week tore up an unfair wage agreement struck between Domino's and the Shop, Distributive & Allied Employees Association, which will see more than 20,000 Domino's workers paid penalty rates and casual loading.

Domino's gave no further update to how the decision will affect its business or it franchisees, reiterating that it expected the higher wage bill to cost the equivalent of up to 2 per cent of total Australian store sales.

"Negotiations for a new EBA are well advanced and the intention is for it to take effect before the termination of the existing EBAs," on January 24, Mr Meij said.

Deutsche Bank analyst Michael Simotas has previously estimated that paying full penalty rates could cost Domino's up to 24 per cent of its earnings.

Mr Simotas said last week that Domino's suggestion of the decisions costing the equivalent of up to 2 per cent of sales equated to a $10 million to $20 million wage bill increase - far lower than estimates by both Deutsche Bank ($32 million) and the unions involved in the case ($35 million to $50 million).

Separate to wage deal issues, Fairfax Media revealed earlier this year that an uneven profit split between Domino's head office and store owners was pushing some franchisees to underpay staff in order to survive.

Domino's said its nationwide wage audit was ongoing and that it would provide a further update at its half-year results. The company's shares closed flat.

This story Domino's gets Japan back on track, ramps up new stores first appeared on The Sydney Morning Herald.