Slicing the pizza
Domino’s Pizza Enterprises Ltd (ASX:DMP) is the largest pizza chain in Australia, and through a master franchise is the leading international Domino’s franchise. Operating more than 3,800 stores across twelve international markets, Domino’s has built a reputation for rapid delivery, customer-focused digital innovation, and a growing footprint through franchise expansion. The company’s growth has largely been steered by the strategic vision of its long-time CEO, Don Meij, who has just announced he will step down from his role after more than two decades at the helm.
Indeed, after an impressive 22-year tenure, Don Meij was set to retire from his position as CEO of Domino’s Pizza yesterday, on November 6, 2024. Stepping into the role is Mark van Dyck, an executive with a substantial track record in global food services. Meij’s leadership has been instrumental in Domino’s global expansion and technological innovation. However, the transition signals a strategic opportunity for fresh insights and direction, especially in a market that is increasingly competitive and consumer-driven.
Mr. Van Dyck brings a wealth of experience from his previous role on the executive board of Compass Group (LON:CPG), a global food services giant with a market cap of US$79 billion. As regional managing director for the Asia Pacific region, Van Dyck is reported to have demonstrated an ability to restructure and enhance profitability in challenging markets. His success in turning around Compass Group’s Japanese business and implementing a strategic reset in Australia that positioned it as a highly profitable segment globally, speaks to his capacity for transformational leadership. Van Dyck’s background also includes 14 years in various executive roles at the Coca-Cola company (NYSE:KO), giving him extensive expertise in brand-driven consumer businesses—a skill set that will be valuable as he steers Domino’s through a period of unsettled consumer demand.
Domino’s latest trading update also revealed continued softness across several major markets, posing a challenge for incoming leadership. In the first 17 weeks of FY2024, group same-store sales (SSS) fell by 1.2 per cent, only a slight improvement from the -1.3 per cent decline reported in the first seven weeks. While markets like Australia, Benelux, Taiwan, and Singapore showed positive sales momentum, Germany, France, and Japan remain a concern, with year-to-date sales still contracting. The German market has shown some recent improvement, though against easier comparatives, while France and Japan continue to lag expectations.
These challenges underline the importance of Mr. van Dyck’s arrival, as his experience in transforming struggling markets may be critical to reviving Domino’s underperforming regions. Only one of Domino’s four key markets – Australia – is tracking positive same-store sales growth year-to-date, indicating significant room for improvement to stabilise and grow the company’s global footprint.
Don Meij’s legacy at Domino’s has been one of impressive growth, but as he moves into an advisory role for the next 12 months, there’s consensus among analysts that new leadership is well-timed. Mark van Dyck’s record of implementing successful transformations in challenging markets aligns well with Domino’s need for fresh strategies, particularly in markets that continue to underperform. However, given the current trading headwinds and Domino’s flat same-store sales performance, analysts remain understandably cautiously optimistic.
Domino’s now faces a potential restructuring under Van Dyck’s leadership. Store performance metrics will need to improve to justify further expansion, and while the near-term outlook for new store openings remains muted, a strategic reset may be on the horizon. With continued challenges in major markets like Germany, France, and Japan, Domino’s will likely need to focus on operational efficiencies, market-specific strategies, and further digital innovation to regain momentum.
The Australian Eagle Trust holds a short position in Dominos. This article was prepared on 05 November 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Dominos, you should seek financial advice.
This is general information only and is not intended to provide you with financial advice and has been prepared without taking into account your objectives, financial situation or needs. The Trust Company (RE Services) Ltd ABN 45 003 278 831, AFSL 235 150 is the Responsible Entity and issuer of units in the Australian Eagle Trust. Prior to making a decision about whether to acquire, hold or dispose of units in the Fund you should consider the Product Disclosure Statement (PDS) and target market determination (TMD) for the Fund to see if it is right for you. The Fund’s PDS and TMD is available here.
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.
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.
