The new information in Domino’s 1H25 result about its franchisee profitability and pending strategic update leave a degree of uncertainty on the stock. Franchisee profitability is still 34% lower than where it needs to be. We expect a strategic update in May or June 2025 to focus on margin improvement opportunities. Given EBIT margins are 5% vs a potential of 7%, the upside is meaningful. Domino’s will need a new investor audience attracted to the margin upside, because store growth is likely to be lower.

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.

Accent Group provided a trading update and details around the planned closure of 17 stores operating under the Glue Store banner. The company highlighted strong second half like-for-like sales trends at 4.1%. This strong performance into the second half of the year was ahead of consensus at -0.4% for 2H24e. The store closures will lower group sales but we lift our gross margin expectations and see improved cost of operations from exiting a portion of the higher cost Glue Stores.