Domino’s falls the hardest as customers avoid price hikes
(Bloomberg) — The shares of Domino’s Pizza Enterprises Ltd. in Sydney fell the most since records began, after the operator of the pizza chain said its profits fell in the first half as customers rejected price increases to offset inflationary pressures.
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The stock fell 24% on Wednesday after the Australia-based company said price hikes have hurt customer numbers, particularly in Europe and Asia. A key measure of the company’s earnings fell 21% year over year in the six months ended December, according to a company statement.
Domino’s troubles reflect the pain rising inflation is inflicting on both consumers and businesses. It is the latest in a string of Australian companies to report inflation concerns during the country’s February earnings season. BHP Group Ltd. said on Tuesday that rising energy and labor costs weighed on its results, while the Commonwealth Bank of Australia said earlier this month that it has set aside more capital buffers as consumers feel the pinch of higher price pressures.
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The Sydney-listed company is Domino’s largest franchisee outside of the United States, according to its website. It holds franchise rights to the pizza chain’s brand and network in countries such as Australia, France, Japan, Germany and Taiwan.
In response to the price increases, “some Domino’s customers reduced their ordering frequency, resulting in December trading falling well short of our expectations,” Chief Executive Officer Don Meij said in the statement.
After initially reluctant to pass the higher costs on to consumers, the company eventually raised prices. But “given the speed of change, it was difficult to predict the impact on customer repurchase rates, especially where customers order less frequently, like in Japan or Germany,” Meij added.
(Updates with Share-Move, additional details throughout)
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