Among the key news on Australian stocks, Domino’s Pizza Enterprises Limited (AU:DMP) shares plunged to a nine-year low after the company reported a weak outlook for its store growth. According to its business update, the company expects flat to slightly positive store growth for FY24 and plans to shut down underperforming stores in Japan and France in FY25. DMP stock has lost 8.3% as of writing.
Domino’s Pizza Enterprises is Australia’s largest pizza chain by store count and sales and the biggest franchisee of the U.S.-based Domino’s brand globally.
More from Domino’s Business Update
In April, Domino’s Pizza Enterprises started reviewing its store locations to evaluate its marketing spend and the sustainability of certain stores. As a result of this review, the company has announced the closure of up to 80 low-volume stores in Japan and up to 20 in France.
The company further stated that these stores were unprofitable and that closing them would improve earnings. Also, the company will invest the savings from these closed stores in its marketing and advertising activities.
In Japan, Domino’s Pizza Enterprises expects to return to growth with positive same-store sales in FY25, with core margin improvements. Overall, the company expects gross store openings of around 3% of its total network in FY25. In FY26, store growth is expected to reach 3-4%.
Domino’s will publish its full-year results for FY24 on August 21.
Analysts’ Reactions
Following the update, Domino’s Pizza Enterprises stock has received two Buy and two Hold ratings from analysts.
Analyst Ross Curran from Macquarie believes that the company’s decision to close stores is reasonable, indicating its focus on profitability. However, it will likely impact expectations in the short term. Consequently, the analyst cut down its earnings forecast by 2% and 5% for FY24 and FY25, respectively. Curran reiterated a Hold rating on the stock, predicting an upside of 12.4%
Meanwhile, Morgan Stanley analyst Melinda Baxter reduced her earnings forecast for FY25 and FY26 by 3% each. Baxter maintains a Buy recommendation on DMP stock, with a projected upside of about 37%.
Is Domino’s Pizza Enterprises a Good Stock to Buy?
According to TipRanks’ rating consensus, DMP stock has received a Moderate Buy rating based on a total of 10 recommendations. The Domino’s Pizza Enterprises share price target is AU$41.77, which is 26% above the current price level.
