Goodbye Denmark: Why the Domino's share price just crashed 9%

Domino's shares have come under heavy selling pressure as the ASX 200 fast-food pizza retailer scales back its global network.

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The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is falling hard today.

The S&P/ASX 200 Index (ASX: XJO) fast-food pizza retailer closed on Friday trading for $46.26 a share. Domino's shares are currently changing hands for $41.90 apiece, down 9.42%.

Here's what ASX 200 investors are considering today.

What's spooking ASX 200 investors today?

The Domino's share price is tumbling after the company updated the market on a series of initiatives intended to deliver a $55 million increase in annualised underlying performance.

Among the cost-cutting measures, Domino's will close all of its 27 stores in Denmark, ending its loss-making Danish venture.

The fast-food pizza retailer said it will also accelerate the refranchising and closing of around 65 to 70 underperforming corporate-owned stores. This represents around 2% of Domino's total 3,827 outlets worldwide.

The company highlighted that it expects improved earnings before interest and tax (EBIT) of some $25 million to $30 million in FY24 from the combined initiatives. And that's expected to increase over the following two years.

But, apart from shrinking the global footprint, the Domino's share price could also be under pressure from forecasts non-recurring costs will impact EBIT by $80 million to $93 million in FY23.

Disappointingly, the company also said that due to slower than anticipated rebuilding of its weekly delivery orders, underlying H2 EBIT growth has not improved on H1 performance as hoped for.

Commenting on the cost-cutting initiatives pressuring the Domino's share price today, CEO Don Meij said:

Any inefficiency is a burden on the system as a whole; streamlining our business allows our franchisees to focus on delivering the best possible customer experience, growing sales and profitability, and expanding their business.

The decisions of today will immediately deliver a stronger business and improve efficiencies for the long-term. As these initiatives are completed and deliver savings, we intend to reinvest approximately one third of these savings to stores, as we reinvest in the franchise network base.

Meij said Domino's long-term plan includes "building out the sizeable opportunity we have in Europe and the Asia-Pacific to more than double our business".

As part of its trading update, Domino's reported new store openings in FY24 will be below the medium-term outlook of 8-10%.

However, the long-term growth outlook for Domino's planned network of 7100 stores by 2033 remains unchanged.

Same-store sales in FY23 also remain below the medium-term outlook of 3-6% annual growth.

Domino's share price snapshot

With today's big intraday drop factored in, the Domino's share price is down 35% over the past 12 months.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Domino's Pizza Enterprises. The Motley Fool Australia has recommended Domino's Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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