Shares in Domino’s Pizza (ASX:DMP) plunged by as much as 30% on Thursday morning after the company withdrew its guidance. This decision followed the revelation that sales in Asia, a major area of operations, were down by 8.9% in the six months leading up to December, compared to the same period in 2022.
Despite some positive news, including sales growth in Germany, Australia, and New Zealand, as well as a positive operational performance in Europe, negative same-store sales in Japan, Taiwan, Malaysia, and France overshadowed these gains. This led to the shares falling to a year-low of $39.50 in early trading before recovering slightly over $40.
As a result, same-store sales increased by only 1.3% for the first half, with total sales rising by 8.8% to $2.139 billion. The net profit before tax is now expected to be between $87 million and $90 million, which, although lower than the previous year’s $104.8 million, is an improvement over the $74.4 million in the first half of 2023.
However, what disappointed the market the most was that the projected range of $87 million to $90 million fell well short of the consensus estimate of $103 million. This, coupled with the decision to withdraw guidance, led to the significant sell-off in shares.
The company explained its decision to withdraw guidance by stating, “With improvements still required in H2 to grow order volumes, Domino’s advises any previous guidance for FY24 performance, de facto or otherwise, is no longer in effect.” Domino’s is now focusing on increasing weekly orders and franchisee margins, based on its successes in ANZ and Germany, and aims to apply similar strategies across all markets.
In essence, the company appears to be uncertain about the reasons behind the sales slump in its key Asian markets, leaving investors concerned about its future performance.