Slow Recovery Post Demonetisation, Withdrawal Of Discounts Hit Jubilant Foodworks Earnings
Revenues were hit due to decline in same-store sales
Jubilant Foodworks Ltd. posted the lowest annual profit in six years in the financial year 2016-17 due to a slower-than-expected recovery from the impact of government’s demonetisation move.
The company attributed the weakness in earnings to two major factors, in a conference call. First was the lack of recovery seen in the post-demonetisation period with substantial weakness in January and February. While dine-in sales were less affected, delivery sales were heavily impacted, according to the management. The second was the withdrawal of ‘deep’ discounts and incentives which included ‘buy one, get one’ offers. Jubilant Foodworks is the exclusive franchisee of quick service restaurants Domino’s and Dunkin Donuts.
Revenue declined 1.3 percent to Rs 613 crore in the January-March quarter, as same-store sales fell 7.5 percent. Net profit fell 76 percent to Rs 6.7 crore, while operating margins contracted to 9.9 percent from 12 percent in the year-ago period.
The Way Forward
Jubliant Foodworks will overhaul its strategy to focus on profitability, in part by closing non-profitable stores, the company had said in January.
As part of the new strategy, the company shut down eight Domino’s restaurants and 13 Dunkin Donuts outlets in the January to March period. Measures to increase profitability will also include curtailing and rationalising costs to keep margins in check. The management expects these measures to reflect in the earnings of the April – June quarter of 2018.
Pratik Pota, a former PepsiCo official, took over from long-time Chief Executive Officer Ajay Kaul in April.
The stock fell as much as 13.1 percent to Rs 817.2 before paring losses to trade at Rs 904 as of 2:00 p.m.