Preview: New outlets, cheaper options fail to revive fast-food earnings in India

Sapphire Foods India

24/04/2024 09:03

By Navamya Ganesh Acharya and Praveen Paramasivam
       BENGALURU/CHENNAI, April 24 (Reuters) - Top fast-food
franchisees in India are likely to report a slump in quarterly
earnings as cash-strapped consumers continued to cut back on
dining out and ordering in, analysts said, spurning the hundreds
of new restaurants that operators opened in 2023.
    Pizza franchisees such as Jubilant Foodworks  JUBI.NS ,
Devyani International  DEVY.NS  and Sapphire Foods India
 SAPI.NS  struggled throughout 2023 due to heightened
competition, with burger chains also joining the struggle later
in the year due to inflation. 
    Even new affordable menu items, such as Burger King's
99-rupee combination of burger, beverage, and fries, introduced
last year, failed to lure customers as India's monthly inflation
rate remained above the target rate so far this year.
    "Earlier you might be visiting (fast-food chains) three or
four times monthly. Now everyone is restricting to once or
twice," said Kranthi Bathini, equity strategist at WealthMills
Securities.
    Analysts polled by LSEG estimate net income slumping between
54% and 97% in the March quarter for Devyani and Sapphire, which
run the Pizza Hut chain of restaurants, and McDonald's operator
Westlife Foodworld  WEST.NS .  
    They expect a net loss at Burger King operator Restaurant
Brands Asia  RESR.NS  to widen sequentially, also marking at
least a 12th consecutive quarterly loss.
    Same-store sales are also likely to fall across the board,
analysts say, with the decline expected to be more pronounced at
Pizza Hut stores at more than 10%.
    However, this has not deterred franchisees - including
Sapphire and Devyani, which also run KFC stores, - from opening
new restaurants nationwide, from Kalimpong hill town in West
Bengal to Shoolagiri village in Tamil Nadu. 
    
    While restaurant operators and analysts expect the
aggressive store opening plans to drive long-term growth, it has
not immediately translated to earnings growth, also squeezed by
stiff competition from local rivals.
    Local pizzerias such as La Pino'z are mounting pressure on
international counterparts, while Restaurant Brands and Westlife
face competition from regional players such as Jumboking and
Biggies Burger.
    
    Westlife kicks off restaurant earnings on May 8 in India,
while others are expected to report in the following days.
    Like consumer goods analysts, restaurant experts also expect
a rebound in demand in the second half of the financial year -
roughly from October onwards - on rising expectations of the
cost of living easing.

        

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Fast-food chains go on store-opening spree    https://reut.rs/3WaAX0U
Restaurant operators underperform benchmark index    https://reut.rs/4b5YioK
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 (Reporting by Navamya Ganesh Acharya in Bengaluru and Praveen
Paramasivam in Chennai; Editing by Janane Venkatraman
)
 ((Navamya.GaneshAcharya@thomsonreuters.com; +91 8805175330 ;))