Domino's Pizza Enterprises Profit Up 25%, But Misses Guidance

By Mike Cherney Features Dow Jones Newswires

Domino's Pizza Enterprises Ltd. (DMP.AU), which runs the brand in Australia, Japan and parts of Europe, said its annual net profit rose by 25% although it fell short of guidance provided earlier in the year.

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The fast-food company said its net profit totaled 102.9 million Australian dollars (US$80.8 million) in the fiscal year ended July 2, driven by growth in its main markets of Australia and New Zealand. Revenue rose 15% to A$1.1 billion, while network sales rose 18% to A$2.3 billion.

The company declared a final dividend of 44.9 Australian cents per share, compared to 38.8 cents in the same period last year.

Domino's said that underlying net profit in the fiscal year was 29% higher, but that was below the 32.5% rise the company expected. Chief Executive Don Meij said the miss was due to issues with the company's online platform in France, as well as a lukewarm reception to the company's value range there. Mr. Meij said those issues have now been addressed.

"We set high standards and we did not reach those high standards," he said in a statement. "I am confident we have the right strategy, and structure, in place."

Looking ahead, the company said it expects net profit growth in the current fiscal year to be around 20%. So far, sales across the group in the current fiscal year are up 6.3%.

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Domino's has in recent years been a favorite of investors as it racked up impressive sales numbers and opened dozens of stores. But some analysts have expressed concerns about whether the company can continue to grow at such a pace, and shares have declined about 20% this year, closing Monday at A$51.11. Ahead of Tuesday's results, some analysts were especially concerned about the performance of the European stores.

The company has attracted publicity for its drone-delivery trials and efforts to deliver pizza in 10 minutes or less. But it has also been buffeted by negative headlines in recent months, including reports that some franchisees were underpaying employees and that the company was taking a big share of revenue at franchisees' expense. Domino's is also facing more intense competition from third-party delivery apps and, in Australia, a revamped Pizza Hut that is now overseen by a private-equity firm and former executives from McDonald's Corp.

-Write to Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

August 14, 2017 18:56 ET (22:56 GMT)