Workers prepare burgers in the kitchen at a restaurant. (Photographer: Andrey Rudakov/Bloomberg)

Why Same-Store Sales Growth Slowed For These Two Fast-Food Restaurants

The same-store sales growth of India’s listed quick-service restaurants fell to its lowest in six quarters. But that may not be due to a slowdown in consumption.

Westlife Development Ltd., the operator of McDonald’s outlets in west and south India, reported same-store-sales growth at 6 percent in the March quarter, while Jubilant Foodworks Ltd.—the operator of Domino’s Pizza and Dunkin’ Donuts chains in India—posted 5.7 percent, according to their exchange filings. That’s the lowest since the three months ended June 2016. Called like-to-like growth, it’s the difference in revenue generated by a retail chain’s existing outlets over a certain period.

Domino’s lower same-store sales growth is because of a very high base last year, according to Prateek Pota, chief executive officer of Jubilant Foodworks. It reported 26.5 percent like-to-like growth in the year-ago period, he said in an earnings call after the fourth quarter. The company also opened several new stores in areas that already had an outlet. While these “split stores” managed to take load off existing counters, according to Pota, it lowered the company’s like-to-like growth.

Even Westlife Development acknowledged that high base led to a decline in same-store-sales growth. But Amit Jatia, vice chairman at the operator of burger chain, said it’s too early to say if there’s a slowdown.

“Within the three months of the last quarter, one was weaker. Whether that is going to continue in the quarters ahead is something we need to see,” he said. “A quarter may be too short a time to conclude if there is a slowdown.”

Jatia also maintained the medium-term guidance of 7-9 percent same-store-sales growth in line with its Vision 2020.

Analysts remain optimistic.

A change in customers’ behaviour to “more delivery-centric” can spur growth for the fast-food restaurants, according to UBS. Morgan Stanley said improving demand, moderate cost inflation in commodities and stringent cost cuts by the companies augur well for the sector.