Shares of Australian pizza giant Domino’s Pizza Enterprise Ltd. fell to their lowest level in nine years on Thursday, as analysts anticipate weak performance following the company’s store closures in Japan and France.
The fast food chain operator’s ASX-listed stock dropped 9.6% to A$32.62, marking its lowest since February 2015. It was last trading 8.6% lower at A$32.96.
The S&P/ASX 200 index slightly declined but remained above the 8,000 threshold at 8,044.60 points.
Shares of the Brisbane, Queensland-based pizza maker have posted losses of over 44% since the start of 2024. Investors remained concerned that the company might fail to meet the high declared by its management.
Domino’s will report its second-quarter earnings later in the day, while its full-year earnings for this year are due on August 21.
Domino’s Store Growth Outlook Turns Dim on Planned Closures
Domino’s presented a bleak outlook for investors on Wednesday, saying it expects “flat to slightly positive” store growth for fiscal 2025.
Australia’s largest pizza chain has been aiming for an annual store growth of 9% in the next five years, and it warned that the timeline for returning to store growth’s medium-term outlook will rely on maintaining improvements in franchise profitability.
Adding to the weak view is the company’s plans to shut about 10% of its stores in Japan and France to address lackluster performance. It also said it would be unable to reach its goal of opening 7,100 stores by 2033.
The move prompted Morgan Stanley analysts to trim their earnings forecasts for the pizza maker’s fiscal 2025 and next by 3%. Analysts at Macquarie Group Ltd. also cut their estimates for the current fiscal year and the 12 months ending June 2025 by 2% and 5%, respectively.
Domino’s maintained its target of increasing its store numbers by almost twofold in the future. Still, it stated that its management is currently prioritizing profitability and driving sustainable organic growth across its stores.
Between the 2020 and 2023 financial years, the retail food chain operator had more than 400 outlets in Japan, leading to some undeveloped stores.
The company plans to close 80 loss-making stores in the country to potentially revive positive same-store sales in Japan for fiscal 2025 and achieve a 3%-4% overall group store growth in the following fiscal year.
The pizza maker has 1,015 outlets in Japan and previously planned to expand the number of stores in the country by 97% to 2,000 in the long run.
Domino’s will also shut down 30 of the 482 outlets it set up in France. It looked to open 1,000 stores in the country over the long term and around 10 outlets this year.
