Updated February 2nd, 2024 at 14:09 IST
Devyani International faces slowest revenue growth since listing; cost surge adds to challenges
Consumers have curtailed spending on pizzas and fried chicken amid surging inflation, posing challenges for global fast-food restaurants in India.
Devyani International Q3: KFC India operator Devyani International has posted its slowest quarterly revenue growth since its listing over two years ago on Friday, February 2. The slump is attributed to consumers curtailing spending on pizzas and fried chicken amid surging inflation, posing challenges for global fast-food restaurants in India.
Despite efforts such as introducing budget-friendly menu items and celebrity-endorsed marketing campaigns, these establishments continue to grapple with attracting cost-conscious customers.
Devyani International reported a modest 7 per cent growth in revenue from operations, reaching Rs 843 crore for the third quarter ending December 31. This marks its slowest revenue growth since its listing in September 2021 and falls short of analysts' expectations, as per LSEG data, which estimated revenue at Rs 896 crore.
The current scenario sees consumers turning to local pizzerias that offer more economical options, impacting profits at both Domino's operator Jubilant FoodWorks and Devyani's Pizza Hut establishments.
Chairman Ravi Kant Jaipuria noted, "Consumer sentiment remains subdued, despite Q3 traditionally being a strong and festive quarter."
Adding to the challenges, total expenses surged nearly 16 per cent from the previous year, further denting Devyani's margins. The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin contracted to 17.4 per cent, down from 22 per cent a year ago.
Consolidated profit witnessed a significant decline, dropping almost 87 per cent to Rs 96.2 crore.
Despite the current hurdles, the company maintains optimism regarding a recovery in the coming quarters. It expresses confidence in reaching 2,000 stores by the end of the calendar year 2024.
Shares of Devyani, which experienced a 6 per cent decline in January, fell by as much as 2.1 per cent following the release of the results.
This follows recent financial challenges faced by other players in the industry, with Jubilant Foodworks reporting an unexpected profit fall earlier this week, and Westlife Foodworld, the operator of McDonald's restaurants in southern and western India, posting a more substantial-than-expected profit drop.
(With Reuters inputs.)
Published February 2nd, 2024 at 14:09 IST