New Domino’s boss Mark van Dyck swings the axe on more than 200 loss-making stores

New Domino’s Pizza chief executive Mark van Dyck will swing the axe on 205 loss-making stores, the majority in Japan, in a bid to improve profitability.

The struggling Japanese market will take the brunt of the blow, with 172 stores — 58 franchised and 114 corporate-owned operations — to shut up shop at a cost of $97 million. The closure will hit almost one in five of the 944 Domino’s stores in Japan.

It marks the first major move by Mr van Dyck, who stepped into the role in November.

Mr van Dyck on Friday said many of the stores targeted for closure were opened during COVID-19, fuelling a surge in sales.

But he conceded these have since struggled amid the post-pandemic decline in demand and higher costs as inflation soared.

“As we’ve been carefully working on the turnaround plan for Japan, it became clear that we opened a large number of stores during the extraordinary period of COVID trading and that those were not really sustainable when sales normalised,” he told analysts.

“That was coupled . . . with historic levels of cost inflation, something that had a major impact in Japan because Japan economically was very unused to that.”

Domino’s has 3733 stores stretching from Europe to Australia. Japan currently has the biggest network. while there are 740 outlets in Australia.

The other 33 store closures will be spread across Australia, New Zealand, Europe and other Asian markets.

Domino’s has already been closing stores. Last July, it announced it would close up to 110 loss-making shopfronts across Japan and France and dumped plans to target 7100 locations by 2030.

When asked if the company was done with store closures for Japan or the entire network, Mr van Dyck said: “Today’s announcement is based on what we can see in front of us.”

“We’ve made the necessary decisive actions on store closures for all our markets, which will allow us to focus now on sustainable growth,” he said.

Mr van Dyck said it was also testing a new approach to pricing and promotion.

“Quite honestly I think sometimes we discount too much and give away revenue that we don’t need to,” he said.

“You can, if you’re not careful, unintentionally communicate to consumers . . . that it’s not quality.”

Mr van Dyck — who succeeded long-serving boss Don Meij — believes Japan can still deliver long-term growth.

“(Japan) is a very large (quick service restaurant) market worth $105 billion and still . . . an untapped QSR pizza category worth $2.2b,” he said.

News of the cutbacks sent Domino’s shares closing up 21 per cent to $35.93.

Domino’s reported a preliminary same-store sales decline of 0.6 per cent for the first half of the financial year, despite 4.2 per cent growth in Asia sale over the six-month period.

It noted group-wide same-store sales were up 4.3 per cent since January as Asia benefits from “sales tailwinds” thanks to the timing of seasonal celebrations.

Underlying net profit before tax is expected to be within guidance of between $84m and $86m.

Net debt increased over the first half by $15m to $705.1m, with an underlying reduction of $31.4m, offset by $46.4m in foreign transaction translations.

Domino’s said it plans to issue an interim dividend of 55.5¢ a share.

The company said its Australian and New Zealand network continued to deliver positive results, with new product launches reaching customers on new occasions, including the launch of Domino’s Giant Doughnuts, which added additional sales and customers.