Domino’s Pizza isn’t growing as much as it claims, the investor said in a new lawsuit

Domino’s Pizza Inc is facing a class action lawsuit.

Lucy Nicholson/Reuters

• An investor filed a class action lawsuit against Domino’s Pizza.
• The complaint says Domino’s “exaggerated” its business and financial prospects to investors.
• The company made “misleading statements” about its overall store growth, the complaint said.

An investor has filed a class-action lawsuit against Domino’s Pizza, claiming the restaurant chain “overstated” its business and financial outlook.

Law firm Bernstein Lierbhard LLP said in a press release that the lawsuit was filed against investors who purchased or purchased Domino’s securities between December 2023 and July 2024. The complaint, filed Sept. 20 in Michigan, also included Domino’s CEO Russel J. Weiner and CFO. Sandeep Reddy as defendants. It is centered on Domino’s Pizza Enterprises, the brand’s largest franchisee globally.

“The lawsuit seeks to recover the investment losses of Domino’s shareholders,” the law firm said in a statement.

Domino’s CEO and CFO were also listed as defendants in the complaint.

Justin Sullivan | Getty Images

The complaint says Domino’s made “materially false and misleading statements about the company’s business, operations and prospects.”

Specifically, the annual growth of the company worldwide net store.

The complaint says Domino’s hosted its 2023 Investor Day in December, during which it discussed its long-term guidance for annual net store growth worldwide between 2024 and 2028.

Domino’s and its management failed to disclose that the franchisee faces “significant challenges both in opening new stores and closing existing stores,” according to the complaint.

The complaint says these challenges made it unlikely that Domino’s would be able to achieve the goals it presented to investors.

Domino’s denied the claims in the lawsuit in a statement sent to Business Insider.

“We believe this lawsuit is totally without merit and we intend to vigorously defend it,” a Domino’s spokesperson wrote in a statement sent to BI.

While Domino’s first-quarter financial report in April suggested the company was on track to meet its global net store growth figure, it indicated that was no longer the case during its Q2 financial report in July.

“The company expects to fall 175 to 275 stores short of its 2024 goal of more than 925 net stores internationally, primarily as a result of challenges in both openings and closings, with faces Domino’s Pizza Enterprises (“DPE”), one of its master franchisees. ”, the Q2 report said.

The report added that Domino’s is “temporarily suspending its guidance value of more than 1,100 global net stores until the full effect of the DPE store and closures on international store net growth is known.”

Class action lawsuit against Domino’s Pizza Inc. refers to annual net global store growth.

Matt Cardy/Stringer/Getty Images

The complaint says the company “overstated” its business and financial outlook so that “its public statements were materially false and misleading at all relevant times.”

As a result, investors suffered losses and damages, according to the complaint.

Despite investor concerns about the net growth of its global stores, revenue at Domino’s rose. The July financial report said Domino’s revenue rose $73.1 million — about 7.1 percent — in the second quarter of 2024 compared to the same quarter in 2023.

Revenues increased “primarily due to a larger supply chain, US franchise advertising and US franchise fee and royalty income.”

“The increase in supply chain revenue was primarily attributable to higher order volumes as well as an increase in the company’s food basket prices to stores, but was partially offset by a change in the relative mix of products sold by the company” , the report said.