Speculation that Domino’s Pizza Group PLC (LON:DOM) could soon appoint a new chief executive sent shares rising earlier this week, but City broker Liberum reckons shareholders need to calm down.
A Sky News report on Thursday indicated that the pizza delivery group was close to agreeing a deal that would see Andrew Rennie, the chief executive for Europe at Domino’s Pizza Enterprises, take over from David Wild as the London-listed firm’s new boss.
READ: UBS warns Domino's that it can't keep raising prices to drive growth
Rennie is highly thought of within the wider Domino’s organisation, having worked his way through the ranks after opening his first franchised store in Darwin, Australia 25 years ago.
The news was greeted with a warm response by Domino’s shareholders following a disappointing run for the stock amid unrest among British franchisees.
By close of play on Thursday, Domino’s shares were up more than 10% having reached seven-month highs during the session.
But Liberum, a well-known Domino’s bear, has urged investors not to get too carried away with the reports.
Tough job for anyone
Although the analysts are familiar with Rennie and are fans of the work he has carried out as the European boss for Domino's Australian arm, they argue that there is no quick fix for Domino’s in the UK, even with Rennie’s magic touch.
“Anyone coming into the new CEO role would take many years to properly change the direction at Domino’s Pizza UK & IRE, as culturally and systematically investment is required across all areas of the group,” Liberum said.
“It is not an easy nor a simple turn-round.”
They also point out that all good and proven leaders come at a price, speculating that Rennie’s potential pay packet “would likely dwarf” that of the incumbent Wild.
Rennie rumours swirling for years
Perhaps most importantly, Liberum isn’t entirely convinced by these latest reports linking Rennie with Domino’s top job in the UK.
“The article was speculative, as there have been rumours re Andrew Rennie joining the UK system for the past nine years or so and DPE has today rebuffed those rumours.”
As a result, Liberum has kept its ‘sell’ recommendation in place, noting that, should a new CEO arrive, they would likely reset growth forecasts.
Having risen sharply on Thursday, Domino’s shares dropped 3.5% to 270p on Friday morning. That’s still 50% higher than Liberum’s 180p price target.