McDonald's India franchisee Westlife's profit misses as costs mount (updated)

Westlife Foodworld

27/07/2023 11:28

(Adds analyst comments in paragraphs 8 and 10; Updates shares
in paragraph 9)
    By Navamya Ganesh Acharya and Praveen Paramasivam
       BENGALURU/CHENNAI, July 27 (Reuters) - Westlife
Foodworld  WEST.NS  reported a smaller-than-expected rise in
first-quarter profit on Thursday as higher expenses eclipsed
increased sales at the operator of McDonald's  MCD.N 
restaurants in west and south India.
    The franchisee said consolidated net profit after tax rose
22% to 288.3 million rupees ($3.52 million) for the April-June
quarter, missing Refinitiv IBES estimates of 321 million rupees.
    India is reeling under rising prices of essentials,
including tomatoes and cheese, prompting restaurants to
introduce new strategies to protect margins and drive sales from
consumers looking to cut back spending.
    McDonald's  MCD.N  in June launched discounted meals
comprising McChicken or McVeggie burger, medium Coke as well as
fries at 179 rupees, with hefty marketing spends, Westlife
Executive Director Akshay Jatia told Reuters last month.
    Same-store sales increased 7% from a year earlier, while
quarterly expenses rose 14% on higher packaging material and
food product prices.
    Revenue from operations rose 14% to 6.15 billion rupees,
driven by an increase in on-premise sales, which includes
dine-in and takeaway, and the addition of four new stores.
    Westlife plans to open 40-45 new stores in the year ending
March, up from 35 in the previous year.
        "Higher pace of store additions in fiscal year 2024
bodes well to boost profitability in coming years," said Amnish
Aggarwal, head of research at Prabhudas Lilladher.
  
        Shares of Westlife climbed over 6% on Thursday to hit a
record high before paring some of the gains to close 1.5%
higher.
  
        The restaurant operator also declared an interim
per-share dividend of 3.45 rupees.
  
        The market is focusing on the positives, Centrum
research associate Soham Samanta said, pointing to the drop in
like-for-like sales at rival and Domino's Pizza franchise
Jubilant FoodWorks  JUBI.NS .  
  
        U.S.-based McDonald's reports earnings later on
Thursday.
  

    ($1 = 81.9400 Indian rupees)

 (Reporting by Navamya Ganesh Acharya in Bengaluru, Praveen
Paramasivam in Chennai; Editing by Nivedita Bhattacharjee)
 ((Navamya.GaneshAcharya@thomsonreuters.com; +91 8805175330 ;))