Pizza Hut India operator 'cautious' on expansion after 20% sales slump (updated)

Sapphire Foods India

02/11/2023 11:19

(Adds analyst comment in paragraph 12)
    By Praveen Paramasivam and Ashna Teresa Britto
       BENGALURU/CHENNAI, Nov 2 (Reuters) - Sapphire Foods
India  SAPI.NS , a Yum Brands  YUM.N  franchisee, on Thursday
reported a 20% decline in quarterly same-store sales at its
Pizza Hut India restaurants on sluggish demand and said it is
"cautious" about opening more outlets.
    Demand for pizzas has been slowing over the last few
quarters, with restaurant operators pushing up prices in line
with higher ingredient costs and as people have been shunning
pizzas for fried chicken and burgers.
    Sapphire blamed the same-store sales decline at its Pizza
Hut India restaurants, which make up roughly a quarter of its
revenue, on "tough macro conditions and specifically high
competitive intensity in the pizza category."
    The decline has also forced Sapphire to rethink its plans to
open additional Pizza Hut restaurants.
    "In the medium term, we will be cautious with our restaurant
expansion plans while continuing to work on improving brand
salience and product innovation," Sapphire said.
    Net profit fell 43% to 153.4 million rupees ($1.84 million)
for the second quarter ended Sept. 30, below analysts' estimates
of 181.9 million rupees, as per LSEG data.
    Shares of Sapphire slid as much as 8.8% post-results.
    Globally, Pizza Hut-parent Yum Brands  YUM.N  is dealing
with slowing customer footfall as high inflation is sapping
consumer spending.
    Same-store sales at Sapphire-operated KFC restaurants,
meanwhile, stayed flat during the quarter.
    Revenue from operations, however, rose 14% to 6.43 billion
rupees as Sapphire opened 36 restaurants during the
July-September period.
    Last month, Domino's India-franchisee Jubilant FoodWorks
 JUBI.NS  reported a smaller 1.3% decline in like-for-like sales
- a key same-store sales metric.
    "Pizza Hut will underperform Jubilant (Domino's) by a very
big margin (this financial year) ... Consistency and user
experience in the pizza category is one of the best at
Domino's," Elara Capital analyst Karan Taurani said.


($1 = 83.2313 Indian rupees)

 (Reporting by Ashna Teresa Britto in Bengaluru and Praveen
Paramasivam in Chennai; Editing by Sonia Cheema)
 ((AshnaTeresa.Britto@thomsonreuters.com;))