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Highlights
- S&P/ASX 200 Index down 0.5%, headed for a weekly loss
- Collins Foods shares drop 1.5% after dividend cut and profit decline
- Domino’s Pizza falls 4% following downgrade and franchisee profit concerns
The S&P/ASX 200 Index has struggled to maintain momentum on Friday, and it is on track to end the week in the red. At the time of writing, the benchmark index is down 0.5%, sitting at 8,433.7 points. Among the shares facing significant declines today, two stand out: Collins Foods Ltd (ASX:CKF) and Domino’s Pizza Enterprises Ltd (ASX:DMP). Here's why these stocks are falling and what's behind their struggles.
Collins Foods Ltd (ASX:CKF) – Down 1.5% to AU$7.94
Collins Foods, the operator of KFC restaurants in Australia and Europe, has seen its share price drop by 1.5% to AU$7.94 today. This dip comes after the company went ex-dividend earlier this morning, meaning that investors who purchase the stock today will not be eligible to receive the upcoming dividend.
Earlier this week, Collins Foods released its half-year financial results, revealing some concerning numbers. The company reported a modest 1.2% increase in revenue to $703.5 million. However, it also revealed a substantial 23.8% decline in underlying net profit after tax (NPAT), which fell to $23.7 million. This sharp drop in profits led the board to announce a 12% reduction in the interim dividend, which will now be 11 cents per share, down from the previous dividend.
The dividend cut likely played a role in the stock's decline today, as investors generally prefer companies with strong profit growth and stable dividend payouts. While Collins Foods’ revenue growth remains positive, the decrease in profitability and the reduced dividend may have spooked shareholders, contributing to the decline in the share price.
Domino's Pizza Enterprises Ltd (ASX:DMP) – Down 4% to AU$31.93
Domino’s Pizza Enterprises is facing a steeper decline today, with its share price falling by 4% to AU$31.93. The drop follows a negative broker note from Macquarie, which downgraded the pizza giant’s shares from a neutral to an underperform rating. The broker also lowered its price target for Domino's to $29.50, signaling a further downside potential in the stock.
Macquarie’s concerns stem from pressures on the company’s franchisee profits, which could hinder its growth trajectory. With rising operating costs and a challenging market environment, Macquarie believes Domino’s may struggle to maintain the same level of profitability in the near term. The broker also anticipates that these pressures could result in earnings coming in below market expectations, leading to weaker-than-expected results for the pizza chain in the medium term.
This downgrade has added to the negative sentiment surrounding Domino's shares today, with investors taking a more cautious stance given the concerns about the company’s future earnings growth. The combination of a weak outlook and market uncertainty has caused the stock to drop significantly.
The Broader Market Outlook
The struggles of Collins Foods and Domino’s are part of a broader trend in the ASX 200, which is facing challenges as it heads toward the end of the week. The market’s inability to sustain its momentum has put downward pressure on a number of stocks, with a few key sectors, such as consumer staples and discretionary retail, particularly impacted.
Investors are likely keeping an eye on the economic environment, with concerns about rising costs, changing consumer behavior, and global economic uncertainty affecting businesses across various sectors. The performance of stocks like Collins Foods and Domino’s reflects the broader trend of market caution and the challenges companies face in maintaining profitability amid changing conditions.
