BENGALURU/CHENNAI (Reuters) – Sapphire Foods India, a domestic operator of Pizza Hut restaurants, on Thursday 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% to 153.4 million rupees ($1.84 million) for the quarter ended Sept. 30. Analysts, on average, were expecting 181.9 million rupees, according to 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% 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% to 6.43 billion rupees as the company opened 36 new restaurants during the quarter.
Globally, KFC and Pizza Hut-parent Yum Brands is dealing with slowing consumer footfall at a time when high inflation is sapping consumers’ buying power.
Shares of Sapphire, which also operates in Sri Lanka, fell as much as 8.8% after the results versus a 1% rise in the Nifty Smallcap 100.
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.
($1 = 83.2313 Indian rupees)
(Reporting by Ashna Teresa Britto in Bengaluru and Praveen Paramasivam in Chennai; Editing by Sonia Cheema)
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