Domino’s Pizza Enterprises stock soars 21% on earnings beat

Investing.com -- Shares of Domino’s Pizza (NYSE:DPZ) Enterprises (ASX:DMP) surged 21.3% today following the release of their half-year earnings for fiscal year 2025, which slightly exceeded market expectations. The company reported that its profit before tax (PBT) for the first half of 2025 is expected to be between $84 million and $86 million, marginally surpassing the consensus estimate of approximately $83.5 million.

Despite a group same-store sales (SSS) decline of 0.6%, with Asia experiencing a 4.2% drop, ANZ and Europe both saw increases of 0.6%, compared to a consensus estimate of a 0.2% decline. The financial results also highlighted that the first half of 2025 would outperform the second half of 2024, which recorded $83 million in PBT, despite previous concerns raised in November investor calls about the earnings for the first half.

Domino’s Pizza Enterprises has announced a business review focusing on Japan and France, expecting an annual benefit of about $34.1 million from store optimization and cost efficiencies. The company anticipates realizing $14.9 million of this in FY25, on top of gross cost savings of approximately $50 million in FY24 and an expected $30 million in FY25.

The company plans to close 205 stores, primarily in the fourth quarter, with 172 in Japan, which are expected to yield savings of $15.5 million per annum with one-off costs of approximately $97 million in FY25.

The closures are projected to increase group average weekly unit sales (AWUS) by about 3.3%. Early sales in Japan for the first half of 2025 were below expectations, but management remains optimistic about the market’s potential.

Domino’s leverage remained comfortable at approximately 2.5 times in the first half of 2025, with net debt rising to $705.1 million. The company expects to maintain its interim dividend of 55.5 cents, which will be fully underwritten, and anticipates a final dividend in FY25 with leverage decreasing to below 2.0 times over time.

Looking ahead, the company reported a 4.3% increase in group SSS in the first five weeks of the second half of 2025, suggesting a significant improvement in the underlying run rate.

Jefferies analysts commented on the company’s performance, stating: "We have increased confidence earnings have bottomed; CEO hasn’t re-based margins as some feared, 1H25 earnings grew modestly HoH, there are some SSSg green shoots, and there is material tailwind from store closures & efficiency measures.

Restoration of growth is required for further outperformance, after today’s >20% move, but new CEO has covered a lot of ground in short time, and we expect impending investor day to be another positive catalyst. Buy retained."

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