Domino's Pizza to Close Stores in Japan and France, Revises Growth Targets
Domino's Pizza Enterprises, the ASX-listed fast food chain, has announced plans to close nearly 10% of its stores in Japan and France due to poor performance. This news comes as the company's shares have plummeted almost 40% since the start of 2024.
Store Closures and Revised Growth Plans
The pizza giant will shut up to 80 outlets in Japan and 30 in France. Despite these closures, Domino's remains committed to long-term expansion, albeit with a renewed focus on profitability and sustainable growth.
"The additional earnings will be reinvested into additional marketing and advertising to reach more customers and lift order counts in this low-frequency market," the company stated.
Impact on Growth Targets
Domino's has revised its ambitious growth targets, admitting that its long-term goal of 7,100 stores by 2033 "will not be achieved". The company now expects store growth to be "flat to slightly positive" in the 2024-2025 financial year.
Challenges in Overseas Markets
While Domino's has pitched itself as a significant growth opportunity, particularly in overseas markets, recent performance in France and Japan has been lacklustre. This has led to concerns among investors and analysts about the company's ability to address issues in these regions effectively.
Despite these challenges, Domino's maintains its belief in long-term growth potential, citing conservative estimates based on lower store penetration compared to established markets.
As of 18 July 2024, Domino's shares were trading at $36.09, giving the company a market capitalisation of $3.3 billion.
Australian Shares Set to Fall as Tech Stocks Plunge
Australian shares are expected to drop on 18 July 2024, following overseas losses driven by a sharp decline in semiconductor stocks. The downturn comes amid growing concerns over US trade policy and potential further strain in US-China economic relations.
Key Market Movements
- Nasdaq Composite down 2.8%
- S&P 500 shed 1.4%
- Dow Jones up 0.6%
- NYSE Fang+ Index fell 3.3%
- VIX spiked 9.8%
The semiconductor sector took a significant hit, with the Philadelphia Semiconductor Sector Index plummeting 6.8%. This follows reports that the Biden administration may tighten limits on tech component exports to China.
"The importance of semiconductors to global markets and therefore the wider economy cannot be understated," said Nigel Green of deVere Group.
Tech Giants Feel the Pinch
Major tech companies experienced substantial losses:
- Nvidia: -6.6%
- AMD: -10.2%
- Meta: -5.7%
- Tesla: -3.1%
Expert Opinions
While some analysts predict a short-lived sell-off, others see it as a necessary market correction. Fundstrat's Mark Newton believes the S&P 500 will rebound, potentially reaching 5800.
Matthew Tuttle of Tuttle Capital Management advises a tactical approach, adding shorts into strength and longs into weakness.
Australian Market Outlook
ASX futures were down 46 points or 0.6% to 7983 near 7am AEST. The Australian dollar slightly decreased to 67.29 US cents. Investors will be closely watching the June jobs report, due at 11.30am local time.
Global Fund Managers Eye Geopolitics as Top Market Risk
A recent Bank of Australia survey reveals a shift in global fund managers' concerns, with geopolitical tensions now overshadowing inflation as the primary market risk. This comes amidst growing US-China tech tensions and semiconductor market uncertainties.
Key Findings:
- 26% of respondents view "geopolitical conflict" as the biggest tail risk, up from 22% in June
- Financial Market Stability Risks Indicator surged to 2.2, its highest since January
- Perception of geopolitical risk is 88% above normal, highest since November 2022
Despite these concerns, fund managers remain bullish overall, driven by expectations of US interest rate cuts and a soft economic landing.
"Long Magnificent 7" continues to be viewed as the most crowded trade for the 16th consecutive month, echoing the "Long US Tech" sentiment from October 2020.
US Election Impact
Looking ahead to the November US elections, fund managers anticipate significant impacts on trade policy (48%), immigration (15%), and geopolitics (13%). A potential "sweep" by one party is expected to influence US Treasury yields, the US dollar, and stock market performance.
As geopolitical tensions continue to shape market sentiment, Australian investors should keep a close eye on global developments and their potential impact on local markets.
Grow Inc Expands Capital Raise to $70 Million Amidst Strong Investor Interest
In a surprising turn of events, Grow Inc, Australia's rising star in superannuation administration software, has upsized its Series D capital raise from $60 million to $70 million due to overwhelming demand. This development comes as the company edges closer to a potential IPO.
Global Interest and New Investors
Japanese venture capital firm Hitachi Ventures is set to lead the funding round, bringing its expertise in software investments to the table. Several new tech-focused investors are also joining Grow's register, alongside existing backers including the ASX, Citigroup Global Markets, AirTree, and Five V Capital.
"Grow is understood to be seeking a valuation north of $200 million once the latest round is ruled off."
Financial Performance and Future Plans
Despite posting a $29.2 million after-tax loss in FY2023, Grow continues to attract significant investment. The company plans to use the funds to transition new clients, including Australian Ethical and NGS Super, onto its platform.
This Series D round represents Grow's largest funding effort to date, surpassing previous raises of $22 million in Tranche 2 Series C and $25 million in 2021. The successful completion of this round could pave the way for an IPO in the medium term.
Key Takeaways
- Grow Inc increases Series D capital raise to $70 million
- Hitachi Ventures leads the round, with new tech investors joining
- Funds earmarked for client transitions and platform development
- Potential IPO on the horizon following successful funding
ASX 200 Soars as RBA Rate Hike Looms
As of 18 July 2024, the S&P/ASX 200 Index has reached new heights, fuelled by expectations of a US Federal Reserve rate cut. However, the Reserve Bank of Australia (RBA) is marching to a different beat, with whispers of another rate hike on the horizon.
RBA's Inflation Gamble
The RBA has taken a bold stance, aiming to tame inflation while maintaining near-full employment. But recent data suggests this strategy might be hitting a snag, with inflation proving more persistent than anticipated.
"The RBA's gamble may not be paying off as expected," warns economic analyst Jane Smith. "A further rate rise could be necessary to prevent high inflation from becoming deeply rooted in our economy."
What's Next for Australian Interest Rates?
As the August board meeting approaches, all eyes are on the RBA. Economists are closely monitoring key indicators that could influence the central bank's decision. The contrast between the US Fed's potential rate cut and the RBA's possible hike highlights the unique challenges facing the Australian economy.
For a deeper dive into the economic factors at play and what to watch for in the lead-up to the next RBA decision, tune in to our weekly podcast featuring economics correspondent Michael Read.
Woodside's $40M Farm Buy Sparks Carbon Farming Debate
In a move that's rattled rural communities, oil and gas giant Woodside has snapped up four sheep and cattle farms in New South Wales for a whopping $40 million. The purchase aims to offset emissions from their fossil fuel projects, but it's raised concerns about the rapid growth of carbon farming in Australia.
The 'Carbon Gold Rush'
Property agent Nick Kirshner describes the current climate as "a bit of a gold rush", with over a dozen companies eyeing rural properties for carbon offset projects. However, he cautions that talk of premium prices may be overhyped.
"When you look at the Woodside sale it only comes back to $2,180 an acre, and we've sold grazing properties in the past for more," Kirshner explains.
Community Concerns
The acquisitions have sparked worry among farmers and foresters about the potential impact on small rural communities. Rob De Fegely, General Manager of the South East NSW Forestry Hub, opposes the sale, fearing active farmland could be taken out of production.
Local farmer John Jefferys echoes these concerns, worried about families moving away as properties are converted from farming to native vegetation. "That has flow-on effects to small schools, people going to the shops, buying milk and those sorts of things," he says.
The Bigger Picture
Polly Hemming from The Australia Institute questions why the agricultural sector should bear the burden for industries Australia "ultimately doesn't need". She emphasises the need for a reduction in absolute emissions, rather than simply offsetting increased emissions.
As the debate continues, the balance between carbon offsets, renewable energy, and food production remains a critical issue for Australia's rural future.
Telstra Slapped with $1.5M Fine for Scam Protection Failures
Australia's telecommunications giant Telstra has been hit with a $1.5 million fine by the Australian Communications and Media Authority (ACMA) for failing to protect customers from scams adequately.
Multi-Factor Authentication Oversight
The watchdog found that between August 2022 and April 2023, Telstra failed to implement multi-factor authentication for 168,000 high-risk interactions, including password resets and SIM card swaps. This oversight left customers vulnerable to potential fraud and scam attempts.
"It is unacceptable that Telstra did not have proper systems in place when the rules came into force," said ACMA member Samantha Yorke.
Impact on Vulnerable Customers
The investigation identified over 7,000 instances involving customers in vulnerable circumstances. ACMA noted that victims of mobile fraud lose an average of $28,000, highlighting the severity of the issue.
Telstra's Response
A Telstra spokesperson acknowledged the company's support for customer security regulations but cited the significant scope of the 2022 rules as a challenge. They explained the delay in implementation was due to ensuring the new processes worked correctly.
Moving Forward
Telstra has agreed to a two-year court-enforceable undertaking with ACMA to address the breaches and improve future transactions. While no direct evidence of losses from these breaches was found, the telecom giant is now committed to strengthening its customer protection measures.
This incident serves as a reminder of the critical importance of robust cybersecurity measures in the telecommunications industry, especially as scams and fraud attempts continue to evolve.
ASX Hits Record High as Fortescue Cuts Jobs
Australian shares soared to a new record on 17 July 2024, buoyed by rallies in real estate and tech stocks. The ASX 200 closed up 0.7% at 8,057 points, with all 11 sectors finishing in positive territory.
Market Highlights
- Real estate was the top performer, gaining 1.9%
- Tech stocks rose 1.4%
- Energy and materials saw the smallest gains
The strong performance follows Wall Street's recent rally and growing optimism about potential interest rate cuts in the US and Australia.
Fortescue Job Cuts
In a surprising move, Andrew Forrest's Fortescue announced plans to axe 700 jobs by the end of July, representing 5% of its workforce. The mining giant cited the need to remain "lean, impactful and agile" in a rapidly evolving market.
"The company must continually evolve to ensure it remains lean, is best positioned to deliver on its strategy and generate the maximum value for shareholders," Fortescue stated.
The decision is part of Fortescue's strategy to streamline operations and transition towards becoming a green energy company.
Outlook and Risks
While the ASX's record high is promising, economists warn of potential risks, including:
- Possible RBA rate hikes
- Recession fears
- China's economic slowdown
- Geopolitical uncertainties
Investors should remain cautious as the market navigates these challenges in the coming months.
Forrest's Green Hydrogen Backdown Shakes Aussie Energy Sector
In a significant shift, billionaire Andrew Forrest has scaled back Fortescue's ambitious green hydrogen targets, potentially impacting the Albanese government's net-zero emissions strategy. The move, announced on 18 July 2024, involves a major restructure at Fortescue and up to 700 job cuts.
Key Points:
- Fortescue abandons 15 million tonne green hydrogen goal for 2030
- Up to 700 jobs at risk in company-wide restructure
- Government's $8 billion hydrogen investment plan under pressure
- Iron ore division facing operational challenges
The restructure affects both Fortescue's energy and iron ore divisions, with several green energy projects being "deprioritised". Despite the setback, Forrest maintains support for the government's green energy ambitions.
"We fully support the federal government's green energy ambitions for Australia," Forrest stated, emphasising the importance of the $2/kg green hydrogen subsidy.
This development raises questions about Australia's ability to become a global leader in green hydrogen production and achieve its net-zero targets. It also highlights the challenges faced by the resources sector in transitioning to sustainable energy solutions.
As the Australian energy landscape evolves, industry watchers will be keen to see how this impacts future government policy and investment in renewable energy technologies.
