Westlife Foodworld Q1 Results: McDonald's India franchisee reports net profit at ₹288 crore, declares dividend

Westlife Foodworld Q1 Results: Westlife Foodworld announced its April-June quarter results for fiscal 2023-24 (Q1FY24) on July 27, reporting a consolidated net profit of ₹288.3 crore, compared to ₹235.7 crore in the corresponding period last year. Higher expenses took the shine off increased sales at the operator of McDonald's restaurants in West and South India.

The company's revenue from operations in the first quarter of current fiscal stood at ₹614.5 crore, reporting a growth of 14 per cent, compared to ₹537.9 crore in the year-ago period. The franchisee for the US fast food chain largely missed analysts' estimates of net profit and revenue during the quarter. 

India is reeling under rising prices of essentials including tomatoes and cheese, prompting restaurants to introduce new strategies to protect margins and keep sales coming in from consumers looking to cut back spending.

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Backed by an increase in guest count, the on-premise business saw an 18 per cent year-on-year (YoY) growth, while the off-premise business expanded by 9 per cent YoY on a high base, according to Westlife's statement. Overall digital sales registered a growth accounting for 64 per cent of the total sales on the back of self-ordering-kiosks at restaurants and McDonald’s Apps.

The company's board declared an interim dividend of ₹3.45 per equity share of face value of ₹2 each, for financial year 2023-24. The record date for the payment of the dividend is set as August 8, 2023.

‘’The Board of directors of the company in its meeting held today have declared payment by the company of interim dividend of Rs. 3.45/- per equity share of face value of Rs. 2/- each i.e. of over 172 per cent, for the financial year 2023-2024, to the members of the company,'' said Westlife Foodworld in a regulatory filing to the stock exchanges.

During the June quarter, Westlife launched the new Piri-Piri McSpicy range, which reinforced its dominance in the burger segment and expanded its McSpicy platform. 

The company roped in Jr. NTR to introduce McSpicy chicken sharers on the McDonald’s menu in the southern market. The brand also rolled out its Jain-Friendly menu, an offering devoid of onions, garlic, and roots as a part of its Eatqual initiative.

"We are pleased with our first-quarter performance, which reflects the resilience of our business model and the strength of the McDonald's brand in West and South India. Despite the challenging market conditions, we have been able to drive growth by focusing on core menu innovation, digital transformation, and enhancing customer convenience,'' said Amit Jatia, Chairperson of Westlife Foodworld.

McDonald's in June launched discounted meals comprising a McChicken or McVeggie burger, medium Coke as well as fries at ₹179, with hefty marketing spends, Westlife Executive Director Akshay Jatia told news agency Reuters last month.

Same-store sales for the quarter increased 7 per cent from a year earlier, but that was not enough to make up for the 14 per cent increase in expenses, with higher prices of packaging material and food products inflating costs.

As of June 2023, Westlife operates 361 restaurants across 58 cities, with four new stores opened during the quarter-under-review. The company plans to add 40-45 new stores in FY24 and aims to reach between 580-630 stores by 2027.

The company's sales in metros grew ahead of non-metro towns on YoY basis, however on the pre-COVID base, the non-metro towns grew much faster. 

On July 27, shares of Westlife Foodworld settled 1.52 per cent higher at ₹899.05, after hitting its 52-weak high peak of ₹942 apiece on the BSE. Domestic brokerage firm Prabhudas Lilladher has given an ‘accumulate’ rating on the stock.

‘’The company saw strong growth across dine-in due to an increase in guest count. Burger category remains insulated from weakness seen in the pizza category. Menu innovations such as Piri Piri McSpicy range and McSaver meals were launched during the quarter which added to its existing portfolio,'' said Amnish Aggarwal – Head of Research - Prabhudas Lilladher Pvt Ltd on Westlife Foodworld Q1FY24 results. 

‘’Higher pace of store additions in FY24 bodes well to increase throughput and boost profitability in coming years. We have an Accumulate rating on the stock with a target price of ₹800,'' added Aggarwal.

Earlier this week, rival Jubilant FoodWorks, which runs Domino's Pizza restaurants in India, posted a 74 per cent slump in quarterly profit due to higher raw material costs and investments to open more stores.