By Ayushman Ojha
(Reuters) – Shares of Australia’s Domino’s Pizza (NYSE:) Enterprises hit a more than nine-year low on Thursday as analysts cut their profit forecasts after the company decided to close low-volume stores in Japan and France.
Domino’s shares fell as much as 9.6% to A$32.62 by 0052 GMT, the lowest since February 2015, while the benchmark index was largely unchanged.
The pizza maker said after the market closed on Wednesday that it expects store growth to be flat to slightly positive in the current fiscal year, and has decided to close up to 80 low-volume stores in Japan and 10 to 20 stores in France.
Analysts at Macquarie say the company’s focus on improving store profitability is sensible, but is likely to negatively impact expectations in the short term.
Domino’s Japan opened more than 400 stores between the 2020 and 2023 financial years, resulting in a number of “immature stores.”
“There were too many loss-making stores in Japan with too long a path to profitability, while the French store closures reflect the challenges facing DMP in that market as the company repositions its operational focus,” UBS analysts said.
The company expects a return to positive same-store sales in Japan for the 2025 financial year, which started this month, and expects total group store growth of 3%-4% for the 2026 financial year.
“Given the lower number of store openings in FY24-FY26, the previous timeline of 2033 will not be met,” Domino’s said on Wednesday.
Analysts at Morgan Stanley cut earnings estimates for fiscal 2025 and 2026 by 3%, while Macquarie cut earnings expectations for fiscal 2024 and 2025 by 2% and 5%, respectively, based on changes to their network growth assumptions.
The food store operator will announce its annual results in August. It had withdrawn its guidance for the 2024 financial year in January after its first-half profit forecast fell short of expectations.
