Domino’s US blames Jack Cowin’s pizza chain for sales slump as it ditches discounts

US pizza giant Domino’s has again blamed its global sales malaise on the Australia division, after its billionaire executive chair Jack Cowin moved to ditch heavy promotions and popular discount vouchers.

Mr Cowin — the biggest shareholder of ASX-listed Domino’s Pizza Enterprises, which operates 3500 stores in Australia, New Zealand, Japan and Europe — has been embroiled in a long-running stand-off with his Nasdaq-listed master franchisor, Domino’s Pizza.

Overnight in the US, Domino’s Pizza reported lower-than-expected second quarter earnings and revealed it continued to be weighed down by the embattled Australian business. Same-store-sales growth for its international division was down 0.1 per cent.

“Domino’s Pizza Enterprises was definitely a drag on our same-store sales because their performance continues to be impacted by the approach that their management have already talked about, which is they’ve actively decided to actually reduce the lower-margin transactions,” Domino’s US chief financial officer Sandeep Reddy told analysts on a call.

“As a result of that, they’ve actually had a reduction in order counts where the ticket increase has not been able to compensate it, and that same-store sales drag that they’ve experienced impacts us pretty materially.

“That’s the other driver that I would say is embedded in the numbers.”

Domino’s US chief executive Russell Weiner said the ASX-listed Domino’s had an initial reboot on the profit side at the expense of orders.

“It’s important for folks to remember that with Domino’s Pizza Enterprises, yes, there are some struggles going on right now and some of them are purposeful, resetting kind of the profit piece here,” he said.

“But they are the number one pizza player in the majority of their markets. They are coming back from a position of strength.”

Mr Cowin — also the founder of Hungry Jack’s — had previously said he would not apologise to the chain’s US parent for moving the business away from heavy discounting, and that it would continue to sacrifice short-term royalties in favour of sustained growth.

Speaking to The West Australian in February, Mr Cowin insisted the move to an “everyday low price” model — where it does not run regular discounts and promotions and instead offers consistent, competitive pricing — was paying off, despite losing 10 per cent of customers who have stopped buying its pizza.

It is a model that has worked well for Wesfarmers-owned Bunnings.

Domino’s earlier this year tapped former McDonald’s Australia and New Zealand boss Andrew Gregory to take on the top job after Mark van Dyck’s abrupt exit.

Mr Gregory’s appointment comes amid a period of turmoil for Domino’s, currently being led by Mr Cowin following Mr van Dyck’s resignation last July after less than a year in the CEO role.

Mr Gregory is set to take up his role with Domino’s in August.

“We’re really looking forward to working with Andrew. He’s got 30 years in the restaurant business, a majority of those with McDonald’s,” Mr Weiner said.

UBS analyst Shaun Cousins said Domino’s US continued to work closely with the local division to turn the business around.