Pizza Hut operator Sapphire Foods fall 9% after Q2 results

Sapphire Foods India shares fell as much as 8.75 per cent to an intraday low of Rs 1,213 apiece on the NSE on Thursday, November 1. The company, which is the domestic operator of Pizza Hut restaurants 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 franchisee's net profit fell 43 per cent to Rs 15.34 crore for the quarter ended September 30. Analysts, on average, were expecting Rs 18.19 crore, news agency Reuters reported quoting 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 per cent 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 per cent to Rs 643 crore as the company opened 36 new restaurants during the quarter.

Globally, KFC and Pizza Hut-parent Yum Brands are dealing with slowing consumer footfall at a time when high inflation is sapping consumers' buying power.

Last month, Domino's India franchisee Jubilant FoodWorks reported a smaller-than-expected fall in quarterly earnings, mainly helped by its move to cut costs even as analysts flagged demand concerns.

Sapphire Foods closed 0.73 per cent lower at Rs 1,319.80 at NSE.