Domino’s Pizza recently announced plans to close approximately 100 fast food outlets in Japan and France due to a review of sales and operations. This decision had a significant impact on the company’s share price, causing it to plummet by 8% on the Australian Stock Exchange. However, despite these closures, Domino’s reported ongoing positive performance in several other countries, including Australia, New Zealand, Germany, and Singapore. Belgium, Netherlands, and Luxembourg also saw improved performance.
In Australia alone, Domino’s has seen significant growth since its first store opened in 1983. As of July 2024, the company has 728 stores across the country. While the closure of low-volume stores in Japan may have some impact on delivery customers, the company assured that they would still be able to receive orders, mitigating the overall effect on sales.
The decision to close these stores in Japan comes after a period of rapid expansion. Between the 2020 and 2023 financial year, Domino’s opened 403 new stores in the country, representing a 67% increase in operations. However, this expansion resulted in a larger number of immature stores in underpenetrated markets. As a result, the company decided to reassess its operations and focus on improving franchise profitability to ensure sustainable growth.
Similarly, in France, Domino’s will reduce its small footprint by 10 to 20 stores in the 2025 financial year. The company plans to apply proven global strategies with local nuance to improve operations and customer satisfaction in this important market. Overall, Domino’s expects store growth to be flat to slightly positive in FY25 globally and predicts a net growth of 3 to 4 percent in the FY26 financial year. While this is lower than their previous three to five-year outlook, the company believes it is necessary to prioritize franchise profitability.
Looking ahead, Domino’s maintains its long-term target of reaching 7,100 stores, which is nearly double its current network. The company considers this target to be conservative, as it factors in lower store penetration compared to established networks, even in countries with larger existing pizza markets. However, achieving this target may take longer than initially anticipated due to the lower levels of store openings in the next few years. Management is focused on building franchise partner profitability and reducing average store payback to facilitate higher and sustainable organic store growth.
On the Australian Stock Exchange, Domino’s faces competition from other fast-food chains such as Guzman y Gomez, Collins Foods, and Restaurant Brands New Zealand. Collins Foods recently reported positive financial results, with a 10.4% increase in revenue and a 15.6% rise in underlying net profit. KFC Europe saw a particularly significant boost in revenue, while KFC Australia experienced a 6.6% increase in revenue. Guzman y Gomez, on the other hand, recently joined the ASX through an initial public offering and saw a surge in share price on debut. However, Domino’s shares continue to perform well compared to its competitors.
Overall, while Domino’s is facing store closures in Japan and France, the company remains optimistic about its long-term growth prospects. By focusing on improving franchise profitability and implementing proven strategies, Domino’s aims to achieve its target of 7,100 stores worldwide. Despite the challenges posed by closures and increased competition, the company’s strong performance in other markets provides a solid foundation for future growth.
