Domino’s Australia franchise falls 7% as high costs take bigger share of profit By Reuters

(Reuters) – Shares in Australia-based Domino’s Pizza (NYSE: ) Enterprises Ltd fell more than 7 percent on Wednesday after the franchise operator signaled a weak start to fiscal 2025 as rising costs and frugal consumers have affected profitability.

Domino’s Pizza Enterprises owns the largest master franchise of the American pizza giant 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, post-pandemic normalization of work and social life, and rising operating expenses have hurt its profitability, with priority markets such as Japan struggling to maintain its post-Covid momentum.

Citi analysts also signaled in May that cheaper alternatives to fast food and local cuisine and low popularity and product quality were major challenges to the franchise’s ambitions in Japan.

Domino’s has since announced the closure of about 80 low-volume stores in Japan as sales have fallen despite higher advertising spending. Sales in the biggest market have fallen by 2.5% so far in the 2025 financial year.

Group-wide sales trended below its expectations, with a flat 1.3% increase.

Consensus Visible Alpha expects a 10% rise in underlying net profit in the first half of fiscal 2025, which Citi analysts say “looks high”, considering the underlying performance of the business “still less than optimal”.

“The weakness at the start of FY25 is disappointing and the market will be looking for evidence that the sales trend can improve,” Jefferies said.

Shares of the franchise operator fell as much as 7.3% to $30,970, their biggest intraday decline since Aug. 2.

Its underlying profit fell 8% to US$120.4 million ($81.25 million) for the year ended June 30, but met the Visible Alpha consensus. Sales rose 4.6% to $4.19 billion, but missed the $4.22 billion consensus.

($1 = 1.4819 Australian dollars)