Domino’s announces it will be shutting down up to 70 stores as part of a plan to lift falling profits
- Australian pizza giant made announcement on Tuesday
- 27 stores in Denmark closed and up to 70 globally
Domino’s has announced its shutting its construction and supply arm in Australia along with 27 stores in Denmark.
Australia’s Domino’s Pizza Enterprises (DMP.AX) made the announcement on Tuesday, sending its shares as much as 11.9 per cent 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 $25million to $30million, compared with $113.9million reported in the first-half of 2023.
The pizza franchise also said it would be scrapping between 65 and 70 of its ‘underperforming’ corporate stores in a major ‘turnaround’.
Domino’s has announced its shutting its construction and supply arm in Australia along with 27 stores in Denmark (stock image)
The Danish store closures represent 0.7 per cent of Domino’s global footprint of 3,827 stores.
The Danish market reopened in 2019 after it went into receivership.
Previous owners had breached the public’s trust due to food safety violations which were splashed across national media.
The franchise said said the closures would result in non-recurring costs of between $80million and $93million for fiscal 2023.
Another 70 to 75 stores will be restructured and sold to other franchisees.
‘Making the decision to close any store is a difficult one, but for these stores it is the right one,’ Global CEO Don Meij said.
He added ‘any efficiency is a burden on the system’.
The pizza franchise also said it would be scrapping between 65 and 70 of its ‘underperforming’ corporate stores in a major ‘turnaround’
‘The decisions of today will immediately deliver a stronger business and improve efficiencies for the long term,’ he said.
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 $144million 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 per cent to 6 per cent annual growth, even as the metric improved in the fourth quarter.
