Australia's Domino's Pizza Enterprises announced on Tuesday its decision to close 27 stores in Denmark, as well as its construction and supply arm in Australia. The news caused the company's
shares to drop as much as 11.9% in early trading, placing them at the bottom of the ASX 200 index.
The Australian franchise stated that streamlining its operations would contribute to an improvement in its fiscal year 2024 earnings before interest and taxation by A$25 million ($16.89 million) to A$30 million. This is in comparison to the A$113.9 million reported in the first half of 2023.
According to a company statement, the closure of the Danish stores accounts for 0.7% of Domino's global footprint, which consists of 3,827 stores. The closures will also result in non-recurring costs ranging between A$80 million and A$93 million for fiscal 2023.
In February, the pizza giant experienced its largest decline in net income since 2011 during the July-December 2022 half-year period, primarily due to weak order growth. The company had previously indicated that its net profit after tax guidance of A$144 million for fiscal 2023 would fall short of consensus expectations.
Citi analysts expressed their view in a note, stating, "While the greater-than-expected restructuring could provide an earnings benefit from FY24, unless the company can improve its customer value proposition and franchisee profitability, we expect the business model to remain under pressure."
Domino's also announced on Tuesday that it anticipates same-store sales in fiscal 2023 to continue to fall below the medium-term outlook of 3%-6% annual growth, despite showing improvement in the fourth quarter. Photo by Michael Barera, Wikimedia commons.