Domino’s franchise in Australia falls 7% as high costs eat up larger share of profit
(Reuters) – Shares in Australia’s Domino’s Pizza Enterprises Ltd fell more than 7% on Wednesday after the franchise operator signaled a weak start to its 2025 fiscal year as rising costs and frugal consumers weighed on profitability.
Domino’s Pizza Enterprises operates the US pizza giant’s largest master franchise in 12 countries in Asia, Europe, Australia and New Zealand with a total of 3,767 stores. Japan accounts for just over a quarter of these stores.
High living costs, the normalization of work and social life after the pandemic, and rising operating costs have impacted profitability, and focus markets such as Japan are struggling to maintain their momentum post-COVID.
Citi analysts also pointed out in May that cheaper fast food and local cuisine alternatives as well as low popularity and product quality posed major challenges to the franchise company’s Japan ambitions.
Domino’s has since announced the closure of around 80 low-revenue stores in Japan as sales fell despite higher advertising spending. Sales in its largest market have fallen 2.5% so far in fiscal 2025.
Group-wide sales fell short of expectations; like-for-like growth declined by 1.3%.
Visible Alpha’s consensus expects underlying net income to grow by 10% in the first half of fiscal 2025. According to Citi analysts, this “seems high” as the company’s underlying performance is “still not optimal.”
“The weakness at the start of fiscal 2025 is disappointing and the market will be looking for evidence that the revenue trend can improve,” Jefferies said.
The franchise’s shares fell as much as 7.3% to A$30,970, their biggest one-day loss since August 2. As of 01:35 GMT, the stock was among the top 10 losers in the benchmark.
Underlying profit fell 8% to A$120.4 million ($81.25 million) for the year ended June 30, but was in line with Visible Alpha consensus. Revenue rose 4.6% to A$4.19 billion, but was below consensus of A$4.22 billion.
(1 US dollar = 1.4819 Australian dollars)
(Reporting by Sameer Manekar in Bengaluru; Editing by Rashmi Aich)
