Domino’s Pizza Enterprises: Pivoting to franchisee prosperity
The HY26 results for Domino’s Pizza Enterprises (ASX:DMP) mark a “reset” phase for the company, as it moves away from a decades-long reliance on deep discounting and volume growth toward a more sustainable, value-driven model.
While this transition will take time, the underlying focus on franchisee health and cost discipline is laying the groundwork for a leaner, more resilient business, perhaps explaining the nine per cent share price bounce at the time of writing (26 February 2026), following an 11 per cent drop the day before on the day of the result’s release.
For the first half of 2026, DMP delivered underlying results that were marginally ahead of market expectations. Underlying Net Profit After Tax (NPAT) reached $60.1 million, slightly edging out consensus estimates of $59.7 million. Underlying Earnings Before Interest and Taxes (EBIT) stood at $101.5 million, despite a volatile global backdrop.
The company also declared an interim dividend of 25 cents per share (cps) (unfranked). While this is significantly lower than the 55.5cps seen in 1H25, it reflects a previously flagged reduction in the payout ratio – a necessary move to preserve capital and accelerate debt reduction.
The strategy: Trading volume for value
Group Same Store Sales (SSS) declined -2.5 per cent as DMP deliberately reduced “blanket discounting” and pulled back on advertising in certain markets.
This will, understandably, produce noisy numbers in short-term sales, leading to a volume rebase. However, the goal is clear: The company intends to improve the margin on every pizza sold. The strategy is already displaying green shoots in franchisee health, with Rolling 12-Month Franchisee Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) increasing 4.5 per cent to $103k – the highest in three years.
Three regions
The half-year was marked by significant regional variability:
- Europe: Despite modest SSS growth of +1.3 per cent, and France being described by some as a ‘basket case’, Europe saw a 23.2 per cent jump in EBIT. This suggests that cost-cutting and pricing efficiencies are taking hold on the continent.
- Asia: Asia remains a challenge with SSS down -6.1 per cent, and the closure of 233 unprofitable stores in Japan, yet EBIT actually grew by 8.2 per cent. The closure of those underperforming stores in Japan is beginning to streamline the operations.
- ANZ: The home market struggled the most, with SSS falling -4.7 per cent and EBIT declining -9.3 per cent. ANZ is currently the primary laboratory for the “pivot” away from discounting, and the benefits from the transition are slower than initially hoped.
Efficiency drive
DMP has been aggressive on the “self-help” front. The company has identified $60–$70 million in annualised cost savings, with $55 million already actioned. Crucially, two-thirds of the FY26 savings are being passed directly to franchisees via lower food costs and reduced marketing levies.
An additional $15–$25 million in savings has been identified, signalling the belt-tightening is not over. This discipline has successfully reduced the leverage ratio to 2.21x (from 2.57x), bringing it closer to the target of <2.0x.
Outlook and messy start
The first eight weeks of the second half have been difficult. Group SSS fell -7.2 per cent, though management notes this was exacerbated by severe weather in Germany and the Netherlands, as well as the timing of the Chinese New Year.
DMP has, however, reiterated its confidence in meeting its full-year guidance. With the incoming CEO, Andrew Gregory (ex-McDonald’s), set to take the reins later this year, the market is expecting a steady hand to guide the company through the final stages of this structural reset.
Speaking of new leadership, the appointment of Andrew Gregory as CEO is a significant catalyst. As a former high-level executive at McDonald’s, Gregory brings a proven track record in managing large-scale Quick Service Restaurants (QSR) turnarounds, a hire who has been warmly welcomed by both the market and Dominos leadership.
Domino’s is currently in the middle of a strategic pivot that prioritises the long-term viability of its franchise network over short-term volumes. While the Same Store Sales (SSS) numbers are sobering, the focus on cost out, balance sheet repair, and disciplined pricing suggests the foundation is being rebuilt for a more profitable future. Investors will need patience as the “new” Domino’s takes shape under new leadership.
While the results were “in line,” the messy start to 2H26 has prompted analysts to keep their ratings under review. The consensus view seems to be the stock is cheap but the road to consistent positive SSS growth will take time. As of the 26th February 2026, DMP’s share price is up 56 per cent from its October ’25 lows and 87 per cent below its Covid ’21 highs.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
