Wrapup 1: India's appetite for pizzas, burgers shrinks, franchisee results show

Westlife Foodworld

31/01/2024 12:20

By Nandan Mandayam and Ashna Teresa Britto
       BENGALURU, Jan 31 (Reuters) - Indians are going out less
often for pizzas and burgers, third-quarter results at Domino's
and McDonald's local franchisees showed on Wednesday, with
analysts noting that tough competition and demand-dampening
inflation would strain their earnings in the near term.
    Domino's restaurants operator Jubilant Foodworks  JUBI.NS 
reported a surprise profit fall, while Westlife Foodworld
 WEST.NS , which operates McDonald's restaurants in south and
west India, posted a bigger-than-expected profit drop.
    Quick-service restaurant (QSR) operators in the country have
done everything from rolling out cheaper offerings and
increasing discounts to cutting packaging costs in a bid to prop
up demand but have failed to get Indians to eat out more often
amid high inflation.
    The same companies were among the biggest beneficiaries
during last year's festive session as Indians began dining out
more often after several pandemic-ridden years.
    The demand slowdown after 2023's high base has not only
dragged their earnings, but has also resulted in negative
same-store-sales growth (SSSG) compared to the usual 5%.
    While demand weakness "might be near the bottom," the
industry is unlikely to reach earlier SSSG growth, said Karan
Taurani, an analyst with Elara Capital.
    The margins of the two companies are also unlikely to see a
"significant recovery," according to Amnish Agarwal, analyst at
Prabhudas Lilladher, with Taurani also adding that intensifying
competition from smaller players would keep margins "strained."
    Jubilant's profit of 657.1 million rupees ($7.9 million) was
down for a fifth straight quarter, much lower than analyst
estimates of 902.6 million rupees, while its revenue growth
slowed for the seventh quarter in a row.
    Westlife, meanwhile, reported its first revenue fall in
three years and its profit of 172.4 million rupees came in far
below analyst estimates of 331.1 million rupees, as per LSEG
data.
    
($1 = 83.0180 Indian rupees)

 (Reporting by Nandan Mandayam and Ashna Teresa Britto in
Bengaluru; Editing by Sohini Goswami and Janane Venkatraman)
 ((Nandan.Mandayam@thomsonreuters.com; Mobile: +91 9591011727;))