Domino's Pizza Enterprises Ltd. experienced a significant drop in its stock value, falling as much as 21% in Sydney and trading down 19% at A$15.71. This decline occurred after the company, which is currently operating at a loss, announced that its sales had deteriorated even more rapidly in the new financial year. In response to these challenges, Domino's also decided to cut its dividend.
The company had previously reported a preliminary unaudited underlying Net Profit After Tax (NPAT) between $118 million and $122 million for FY26, consistent with prior guidance. However, despite a substantial increase in free cash flow to approximately $164 million, the continued decline in sales, particularly a -4.1% drop in Same Store Sales for FY26, has raised concerns. The company also disclosed balance sheet write-downs of approximately $259 million for FY26, largely non-cash, related to optimizing its corporate store portfolio and other balance sheet adjustments.
Analysts note that while the company's efforts to improve franchisee profitability have shown some success, with rolling 12-month Q3 FY26 franchisee EBITDA increasing +11.3% on a constant currency basis, the ongoing sales trends remain a significant challenge. The company anticipates closing up to 60 underperforming stores across Europe, Australia/New Zealand, and Asia as part of its optimization strategy. The stock's reaction indicates investor apprehension regarding the accelerated revenue decline and the broader impact on the company's financial health, despite efforts to strengthen its balance sheet and improve operational efficiencies.
