Domino’s Pizza faces class action over flagging sales in Japan

Pizza maker Domino’s is facing an investor class action over its trouble-plagued Japanese stores.

Domino’s on Monday revealed Echo Law had filed the suit in the Federal Court on behalf of jilted shareholders.

The proceedings relate to investors who entered into a contract to acquire an interest in ordinary shares in Domino’s or long exposure to Domino’s shares by entering into equity swap confirmations in shares between August 18, 2021 and November 3, 2021.

“The proceeding includes allegations that Domino’s engaged in misleading or deceptive conduct and breached its disclosure obligations with respect to Domino’s expected performance in the Japan market,” the company said.

Domino’s reported in August 2021 that it was enjoying strong sales momentum from its European and Japanese markets, with Japan leading positive contributions from all segments following rapid expansion in the lead-up to and during the COVID-19 pandemic.

It opened more than 400 stores in Japan between the 2020-23 financial years.

The mood had soured just months later when it revealed weak performance from Japan, which had recorded “excellent compounding sales” in the country before the government lifted a coronavirus national state of emergency at the end of September. However, it recorded negative sales on a one-year basis after restaurants, bars and shopping centres reopened.

Domino’s shares tanked 19 per cent on the day of that announcement.

The company said it denies any liability and will defend the legal action.

Its shares were down 2.4 per cent amid a weaker overall market to $29.23 at 10.30am.

Along with a vast Australian network, Domino’s also operates in New Zealand, Belgium, France, the Netherlands, Germany, Luxemborg, Cambodia, Taiwan, Malaysia and Singapore.

It currently has 1000 stores in Japan, its most established Asian market.

But its 2024 annual report released late last month noted it was undertaking a turnaround program in Japan to lift average weekly order counts. It also announced the closure of up to 80 underperforming stores — both franchise and corporate outlets — to improve the overall health of the Japanese business.

“While early results are promising, we acknowledge that more time is needed to fully realise the potential of these efforts,” the report said.

“Nevertheless, our long-term vision for Domino’s Japan remains the same and we are committed to navigating through these challenges to achieve sustained growth and success.”