It might be a dark sign when a pizza restaurant like Domino’s Pizza (DPZ) closes stores. Not only does that mean one less place for greasy fast food pizza, it also means that the market is incapable of supporting one more place for greasy fast food pizza, typically one of the cheaper food options. That is, however, what happened to Domino’s, and shares slipped fractionally in Friday afternoon’s trading.
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Specifically, Domino’s Pizza Enterprises in Australia looks to close 172 stores in Japan, which proved to be loss-making stores. But this will prove only the start, though a very big start at that. The new CEO therein revealed that around 205 stores would be closed, and most of these stores would be closed in “the June quarter.”
The move will cost around A$97 million as a one-off cost, reports note, but would in turn produce about A$15.5 million annually in savings. That would give the move a payback period of somewhere around seven years. The stores closed were, in part, opened as a result of COVID-19 era conditions, in which fast-food pizza took on a whole new, if somewhat brief, life from people not being allowed to eat in restaurants for a while.
And They’ll Need It, Too
Meanwhile, Domino’s also has a new partnership arrangement that should be welcome, especially to anyone whose job is about to be lost due to their location being closed. Domino’s got together with [yellow tail] wine to bring out a new Domino’s-branded red wine that apparently pairs well with pizza.
The Limited Edition [yellow tail] & Domino’s Red Blend, as it is known, is “uniquely crafted to provide the perfect sip with every slice. It is, apparently, geared toward a “traditional pizza,” but the companies are convinced that any set of toppings will stand up well with this unexpected beverage choice.
Is Domino’s Good to Invest In?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on DPZ stock based on seven Buys, four Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 11.1% rally in its share price over the past year, the average DPZ price target of $482.08 per share implies 3.1% upside potential.
