Dominic Walsh explains why Domino’s David Wild deserves praise for his transformation of the pizza business, but questions where future growth will come from. He also looks at mixed messages from the Just Eat board and why Steve Richards deserved to be named Retailers’ Retailer of the Year.
Hats off to David Wild. When the veteran retailer took the helm at Domino’s Pizza a couple of years ago, he appeared to have a lot on his plate to sort out. Relations with its UK franchisees appeared strained amid suggestions that the balance between the two sides seemed to have become too heavily weighted in favour of the company. This, in turn, appeared to be putting at risk its remarkable record of strong like-for-like sales growth. Plus, the ambition of recreating its British success all over again in
Germany had turned sour, costing it an eye-watering £50m in set-up costs, trading losses and write-offs.
When his predecessor, former submarine officer Lance Batchelor, had weighed anchor and announced he was sailing off to join the soon-to-float Saga Group, it seemed like an acknowledgment that the halcyon days when Domino’s was a cash machine, creating multimillion-pound fortunes for directors, franchisees and big investors alike, was well and truly over.
How wrong we were. Using his decades of retailing nous built up during spells with names like Tesco, Halfords and Walmart, Wild set about restoring Domino’s Pizza’s growth credentials, notably by putting the balance back into the relationship with its franchisees and boosting its digital capability. He also made a number of senior management changes and, in his typical no nonsense fashion, was not afraid to admit when he’d got it wrong with the appointment of Paul Doughty as chief financial officer.
He also tried to sort out the mess of Germany by closing some of the sites and trying to get the basic store economics right on the rest. Sensible though his efforts seemed, progress was slow and it appeared that the redoubtable Wild might have to simply pull down the shutters on the German experience and retreat back to home territory.
But the Domino’s boss is made of sterner stuff than that. All the while, he was holding secret talks with Domino’s Pizza Enterprises, which holds the master franchise rights for Australia, New Zealand and Japan as well as for France, Belgium and the Netherlands, about a complex, yet fiendishly clever, deal that Wild was able to hail, with complete accuracy, as “a transformational deal for our German operations”.
By injecting his ailing German business into a new joint venture with his Australian counterpart, creating immediate scale by acquiring the market-leading Joey’s Pizza and granting the Aussies an option to buy the Brits out in a few years’ time, Wild has excised the cancer and created the potential to recoup at least some of the losses.
Recent full-year results show that, under Wild, Domino’s has regained its thoroughbred status. UK like-for-likes rose by 11.7% and system sales were up 15.8%. With like-for-likes in the first nine weeks of 2016 up by an even healthier 16.1%, it is hard to find fault. Even its much smaller Swiss business is showing promising signs.
Of course, with the UK now up to almost 900 stores and closing in fast on its target of 1,200, it does rather beg the question of where future growth will come from in the medium to long term, even allowing for the inevitable upping of its UK target to at least 1,300. Germany was to have provided that growth story, but that is now, to all intents and purposes, a discontinued business for Domino’s.
So what does the future hold? Well, Wild, though clearly enjoying himself hugely after returning to the front line, is no spring chicken, so it may be that he leaves it to his successor to find the key to long-term growth opportunities. Then again, Wild could always go out with a bang and try to engineer the sale of the company itself to the ever-ambitious Don Meij at Domino’s Pizza Enterprises, who, I’m told, harbours hopes one day of swallowing the British business.
Convincing arguments let down by trousering of millions in Just Eat shares
On the subject of takeaways, I must admit to feeling a little ambivalent about recent goings-on at Just Eat. Despite huge scepticism every step of the way, the company has established itself as a mighty player in the market – with the potential to become the major player on the global stage if it grows at its current pace, both organically and by acquisition.
In February, David Buttress, Just Eat’s highly impressive chief executive, used a trading update to respond to the recent negative analyst comment that had taken a big bite out
of its share price by lamenting that many City watchers “don’t understand the fundamentals of our business”. He insisted the company had nothing to fear from the likes of Uber and Amazon if they did decide to enter the takeaway delivery market and painted a compelling case for the company’s ability to stay several steps ahead of the competition.
Hearing him outlining this golden future, it is hard not to buy into it. Yet the Just Eat boss rather burst the bubble three days after the full-year results announcement when he and his CFO, Mike Wroe, announced they had offloaded a significant proportion of their personal holdings in the company. Buttress collected £12.5m while his colleague pocketed £6.6m.
I fully accept that having most of one’s wealth tied up in a single company is probably not that wise and some diversification of investments makes sense. I do, however, question whether, given that the duo had spent much of the previous month trying to convince the market that Just Eat is a good place to invest their money, they should so quickly themselves take an alternative route. I know how hard they’ve worked to get the company to where it is and I don’t doubt they richly deserve the rewards they’ve collected. However, when they next try to argue that analysts and other external observers don’t understand what they’re doing and should have more faith, they may find persuading them an altogether harder task.
Richards’ fast work at CDG is worthy of top honours
When Steve Richards picked up the Retailer’s Retailer prize the other day, it is fair to say the comments from the audience were not universally positive. In the aftermath of the awards ceremony, I heard a smattering of comments about whether someone who had left Novus Leisure in such dire straits should be collecting the industry’s top award.
Now, I can’t really comment on how far Novus’s present woes are down to what happened on Richards’ watch. But even if he does bear some responsibility, does the way he has bounced back from the disappointing end to his time there and turned around the fortunes of what is now the Casual Dining Group not deserve our praise? The pace with which he has achieved things at the Café Rouge and Bella Italia operator has been truly remarkable, even allowing for the generous financial support from Apollo, and with further acquisitions and international development deals highly likely, I suspect even the more sceptical among those gathered at the Guildhall will come to acknowledge his achievements.
Dominic Walsh is a business reporter at The Times covering the leisure, tobacco and drinks industries
