Pizza Hut India operator misses Q2 profit view, 'cautious' on expansion

Sapphire Foods India

02/11/2023 09:21

BENGALURU/CHENNAI, Nov 2 (Reuters) - Sapphire Foods
India  SAPI.NS , a domestic operator of Pizza Hut restaurants,
on Thursday reported a bigger-than-expected fall in quarterly
profit on sluggish demand for pizzas and said it is "cautious"
about opening more outlets.
    The Yum Brands  YUM.N  franchisee's net profit fell 43% to
153.4 million rupees ($1.84 million) for the quarter ended Sept.
30. Analysts, on average, were expecting 181.9 million rupees,
according to LSEG data.
    Demand for pizzas has been sluggish over the last few
quarters, with major companies pushing up prices in line with
higher cheese and vegetable costs and as people have been
shunning pizzas for fried chicken and burgers.
    Sapphire said same-store sales at its Pizza Hut India
restaurants declined by 20% for the second quarter, blaming
"tough macro conditions and specifically high competitive
intensity in the pizza category."
    Pizza Hut India contributes to roughly a quarter of
Sapphire's overall revenue.
    The sharp 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.
    Same-store sales at Sapphire-operated KFC restaurants in
India stayed flat as people consumed less meat during certain
festivals, the company said.
    Revenue from operations, however, rose 14% to 6.43 billion
rupees as the company opened 36 new restaurants during the
quarter.
    Globally, KFC and Pizza Hut-parent Yum Brands  YUM.N  is
dealing with slowing consumer footfall at a time when high
inflation is sapping consumers' buying power.
    Shares of Sapphire, which also operates in Sri Lanka, fell
as much as 8.8% after the results versus a 1% rise in the Nifty
Smallcap 100  .NIFSMCP100 .
    Last month, Domino's India franchisee Jubilant FoodWorks
 JUBI.NS  reported a smaller-than-expected fall in quarterly
earnings, mainly helped by its move to cut costs even as
analysts flagged demand concerns. 


($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;))