Ann: Trading Update, page-58

"its a negative sign closing stores. that means the growth entire thesis is finished. the 22% rise is desperation from institutions."

Yes and no.

I thought long and hard about selling out today. But seeing as I've got a decent margin of safety (after continually bashing on in these forums not to chase DMP in the 30's, but wait for it to come back into the 28's) - I've decided to hold on. I see a pullback coming again. I'm not deluded by name, or by nature.
( @deluded ).

If you have a poor performing stock over a long duration that's losing you vast amounts of money, do you sell them, or do you hold them?

Businesses are no different. Why persist with loss making ventures? So yes, it's kind of a negative sign. But not as negative as continually swimming against the tide. Is the growth thesis finished? Well again, yes and no. Growth may be finished in Japan and maybe time will show that even France is finished. But maybe growth isn't quite finished as profitable stores retain (and potentially) grow their profitability over time.

The previous CEO was hell bent on fortification and geographical dominance. His legacy has been somewhat of a negative. But that's okay. He drives a Lamborghini and I do not. I drive a 20 year old Toyota. Still, Don Meij grew this business into the behemoth that it is today. Take nothing away from what he has achieved. He's been a success.

So it makes perfect sense to ditch what hasn't worked and to stem the bleeding. Instead of having a CEO who was hell bent on a countless number of stores, the new CEO seems more focused on quality over quantity. Would you rather own two fantastic stocks, or hold 20 sub par stocks? I think that their ongoing review will uncover more strategies to enhance business profitability. The way in which the business was going was heading towards self cannibalism. That's quite evident.

I'm not attempting to pump up this recent update. But it takes guts to say "hey...this is bad, we gotta start a correction process here". Domino's were going nowhere. Anyone who bought shares and has since held them for a decade would probably agree. The appreciation in share price over a decade has been zilch. Unless of course you were smart enough to sell out at the covid highs. Just the like the lads at Afterpay...smart cookies.

Domino's needed to desperately start making changes. No business should stand still. Domino's have ballsed it up. Now they need to steady the ship. They already have the GLOBAL branding. Now they just have to make the changes to enhance their brand and to create sustained value for their shareholders and their customers.

I was expecting the share price action to fizzle out. But I've learnt that market analysts talk, whilst the market itself is silent. But the market speaks louder than the commentators and the analysts. This afternoon, the market was telling me to hold on. The market anticipates a reversal in fortunes.

Had Domino's continued with what they were doing, the business would be doomed to perennial failure.

Imagine a half year report with increased debt, still losing money in Japan and they say "but guess what, we'll continue to grow by opening more stores!"

The share price would be -20% instead of +20%.

That's why the market liked it. All day long.