Morgan Stanley says Domino’s strategy to lift store sales ‘unclear’ amid CEO resignation fallout
Investment bank Morgan Stanley is sceptical about Domino’s strategy aimed at restoring the embattled pizza chain’s sales and profitability amid the fallout from boss Mark van Dyck’s sudden resignation this week.
Domino’s executive chair Jack Cowin — who is also Hungry Jack’s founder — told worried investors and analysts late on Thursday the company was targeting to lift same-store sales by 3 per cent, after he conceded the business had recorded flat results for the past four years.
But Morgan Stanley analysts told clients the strategic direction was unclear.
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By continuing you agree to our Terms and Privacy Policy.“Management are hopeful about achieving a forward target of over 3 per cent same-store sales growth, but the strategy to deliver this remains unclear, in our view,” they said in a note following the investor call.
“Efforts continue to restore profitability to the network, but the exact quantum and timing remains unknown.”
They added the rise of food delivery aggregators — like UberEats and DoorDash — have posed more of a headwind to Domino’s sales than changing consumer preferences, like taste.
“(Domino’s) no longer has a competitive advantage in tech (online ordering),” analysts said.
“Their competitive advantage going forward will be, ‘Being the biggest strongest pizza company in the market, with advertising power, store network and execution’.”
Mr Cowin — Domino’s biggest shareholder with a 25 per cent stake — will now take on the day-to-day management of the embattled pizza chain in his executive chair role while Domino’s looks for Mr van Dyck’s replacement.
Mr van Dyck will remain with the company until December.
Domino’s shocked the market on Wednesday by announcing Mr van Dyck — who only took over from long-serving chief executive Don Meij in November — had signalled his intention to step down.
Mr Cowin on Thursday said Mr van Dyck was not pushed to leave and that it was solely his decision. At the same time, he assured investors the company was “not in disarray”.
Domino’s shares closed up 2.4 per cent to $17.74 on Friday.
