By Navya Mittal
Australia's Domino's Pizza Enterprises said on Tuesday it would shut 27 stores in Denmark, and its construction and supply arm in Australia, sending its shares as much as 11.9% lower in early trade to the bottom of the ASX 200 index.
The Australian franchise said the streamlining of operations would help improve its fiscal year 2024 earnings before interest and taxation by A$25 million ($16.89 million) to A$30 million, compared with A$113.9 million reported in first-half of 2023.
The Danish store closures represent 0.7% of Domino's global footprint of 3,827 stores, it said in a statement, adding that it would also result in non-recurring costs of between A$80 million and A$93 million for fiscal 2023.
In February, the pizza giant posted its biggest drop in net income since 2011 during the half-year period from July-December, 2022 on weak order growth. The company had also flagged its fiscal 2023 net profit after tax guidance of A$144 million would miss consensus.
"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," Citi analysts said in a note.
Domino's said on Tuesday it expected same-store sales in fiscal 2023 to remain below the medium-term outlook of 3%-6% annual growth, even as the metric improved in the fourth quarter.
($1 = 1.4806 Australian dollars)
(This story has been corrected to clarify that the Danish store closures represent 0.7% of the global footprint, not 2.0%, in paragraph 3)
(Reporting by Navya Mittal in Bengaluru; Editing by Rashmi Aich)
