Sapphire Foods posts surprise Q2 loss as consumers watch spending

Sapphire Foods India, which operates Pizza Hut and KFC restaurants in the country, posted a surprise quarterly loss on Monday, as inflation-weary consumers chose to dine out less.

Global fast-food chains, including McDonald's and Domino's, have been doubling down on cheaper pizzas and burgers in the price-sensitive Indian market, where consumers have been cutting back on discretionary spending due to rising prices of essentials, including food.

KFC has over the last few quarters launched more "value offerings" in Rs 99-149 range, while Pizza Hut introduced the "folded" pizza, called Melts, from Rs 169.

However, these were not enough, as Sapphire Foods, a franchisee of KFC and Pizza Hut owner Yum Brands, posted a loss of Rs 3.04 crore for the quarter ended Sept. 30.

Analysts, on average, had expected a profit of Rs 95 lakh, according to estimates compiled by LSEG.

The company posted a profit of Rs 15.34 crore last year.

Same-store sales declined 8 per cent at KFC restaurants across India and fell 3% at Pizza Hut stores across the country.

"Demand conditions continued to be muted," Sapphire Foods, which runs over 900 restaurants in India, Sri Lanka and Maldives, said.

Overall revenue from operations, however, climbed 8% to Rs 696 crore as it added 23 more restaurants in the quarter but still fell short of market expectations of Rs 702 crore.

Westlife Foodworld, which operates McDonald's in west and south India, last week reported a sharp drop in quarterly profit on lower demand for its burgers among cost-conscious consumers.

Devyani International, another Yum Brands franchisee, and Domino's India operator Jubilant FoodWorks have yet to report results for the quarter.