Australia's Domino's Pizza slumps to over 9-year low on bleak store growth view

Dominos Pizza Enterprises

18/07/2024 02:10

By Ayushman Ojha
       July 18 (Reuters) - Shares in Australia's Domino's Pizza
Enterprises  DMP.AX  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
 .AXJO  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 It had withdrawn its fiscal 2024 outlook in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)
 ((Ayushman.Ojha@thomsonreuters.com;))