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Highlights
- Weakness in France Disappoints Analysts: Citi downgrades Domino's Pizza to "neutral" from "buy" as the company faces ongoing challenges in France despite recent initiatives.
- Slow Store Expansion and Closure Concerns: The pizza chain's slow pace of store openings and closures raises concerns about its ability to meet growth forecasts.
- Stock Performance Weakens: With a 47% drop in stock value year-to-date, Citi cuts its price target by 11%, reflecting a more cautious outlook.
Analysts at Citi have downgraded Domino's Pizza Enterprises (ASX:DMP) from "buy" to "neutral," citing disappointing performance in France and slow progress in key markets. The brokerage has also reduced its price target for the stock by 11%, bringing it down to AU$33.25.
Citi pointed to continued weaknesses in France as a major concern, despite the company’s recent initiatives, including the launch of new stores in partnership with Deliveroo and the introduction of new lunch menu items. The brokerage believes that Domino's needs to better engage with its franchise partners and improve its consumer perception in the French market to drive growth.
Slow Growth in Japan and Store Expansion Concerns
While there are signs of recovery in Japan, with some positive data emerging, Citi warned that it is still too early to adopt a bullish stance. The company needs to prove sustained same-store sales growth before analysts can turn positive on the market.
Domino's also faces challenges on the expansion front. As of December 10, the company had only opened 16 new stores in fiscal year 2025, compared to 72 closures. Citi noted that Domino's would need to accelerate its pace of new store openings to meet its FY25 forecast of flat-to-slightly positive net store growth.
Stock Performance and Outlook
Domino’s stock has seen a significant decline, falling approximately 47% year-to-date as of the latest close. This downturn reflects investor concerns over the company's ability to deliver sustainable growth, particularly in critical markets like France and Japan. Citi’s downgrade and revised price target further reflect the growing caution among analysts.
