Australia’s Domino’s Pizza slumps to over 9-year low on bleak store growth view
9:14 pm Wednesday, July 17th, 2024
By Ayushman Ojha
(Reuters) – Shares in Australia’s Domino’s Pizza Enterprises hit a more than nine-year low on Thursday, as analysts cut their earnings outlook after the company decided to close low-volume stores in Japan and France.
Domino’s stock fell as much as 9.6% to A$32.62 by 0052 GMT, its lowest since February 2015, while the benchmark index was largely unchanged.
The pizza maker said after market close on Wednesday it expects store growth to be flat to slightly positive in its current fiscal year, and had decided to close up to 80 low-volume stores in Japan and 10-20 stores in France.
Analysts at Macquarie said the company’s focus to improving store profitability is prudent but would likely bring near-term downside to expectations.
Domino’s Japan opened over 400 stores between the financial years 2020 and 2023, which resulted in a number of “immature stores”.
“There were too many loss-making stores in Japan with too long a path to profitability, while the French store closures reflect the challenges for DMP in that market as the company repositions its operational focus,” analysts at UBS said.
The company expects a return to positive same-store sales in Japan in the financial year 2025 which started this month, and sees overall group store growth of 3%-4% in fiscal 2026.
“Given the lower levels of store openings in FY24-FY26, the previous timeline of 2033 will not be achieved,” Domino’s said on Wednesday.
Analysts at Morgan Stanley cut earnings estimates for fiscal 2025 and 2026 by 3%, while Macquarie reduced earnings forecast for fiscal 2024 and 2025 by 2% and 5%, respectively, on changes to their network growth assumptions.
The retail food outlet operator is due to report its annual results in August. It had withdrawn its fiscal 2024 outlook in January, after its first-half profit forecast missed expectations.
(Reporting by Ayushman Ojha; Editing by Rashmi Aich)
