Domino’s trading update and news of store closures in Japan signals a clear shift towards improving profit margins and existing store sales productivity. We expect profit margins to improve from 5% last year to 7% medium-term. The unknown is whether this occurs by shrinking the network further.

Domino’s has delivered a post-market trading update highlighting very weak sales in Asia and slowing sales in Europe for 1H24e. The tone of the update also suggests progress, but not enough, on franchisee profitability. We expect it will take longer for store rollout to improve and as a result remain negative on valuation grounds.