Domino's shares fall on flat store growth outlook
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More news: Shares in Domino's Pizza Enterprises slumped more than 8% to $33.02 in early trading on the ASX after the fast food chain said it expected flat store growth in the current fiscal year. This followed a decision to close 80 low volume stores in Japan and up to 30 in France.
Morgan Stanley analysts cut their 12-month price target on the stock to $45 a share from $47 after lowering its FY26 earnings estimate to reflect changes to network growth assumptions.
UBS analysts also cut their price target to $36.50 from $39 a share due to lower expected earnings.
Domino’s to shut up to 110 stores in Japan, France
The news: Domino’s Pizza Enterprises has outlined plans to close low-volume stores in Japan and France following a year-long strategic review.
The numbers: In an announcement after market close on Wednesday, the fast food chain said it would close up to 80 low volume stores in Japan, with the closures to be partially offset by the opening of more than 20 new stores in higher potential locations.
In France, it expects to close 20 to 30 stores offset by 10 store openings. As a result, store growth is expected to be flat to slightly positive in FY25, stepping up to 3% to 4% in FY26.
The context: Domino’s shares are down nearly 40% to $36.09 so far this year as the fast food restaurant chain deals with narrowing margins amid a challenging economic environment.
The Australian company, which opened more than 400 stores in Japan between FY20 and FY23, said it had been reviewing and testing marketing spend and considering the ongoing viability of some stores. The majority of delivery customers previously serviced by the closed stores will be serviced by neighbouring stores, improving their unit economics, and minimising the total sales impact for the market. In aggregate, it expects a positive impact on earnings from the closures.
Similarly, it expects the majority of delivery orders from the closed stores in France will be serviced by neighbouring stores, with the earnings improvements to benefit Domino’s France FY25 EBIT.
The source: ASX announcement
