Westlife Foodworld, which operates McDonald’s restaurants in west and south India, reported a 96% drop in fourth-quarter profit on Wednesday, as inflation-weary consumers reduced their spending on fast food, despite franchisees’ efforts to entice them with lower prices.
The company’s shares experienced a decline of up to 7.7% following the release of the results, before ultimately settling down 1.7% at the closing bell.
Quick-service restaurants have faced challenges in enticing customers amid persistent inflation and mounting competition from local establishments.
Westlife reported a decline in consolidated profit after tax to 7.6 million rupees ($91,012.8) for the January-March quarter, down from 200.9 million rupees compared to the previous year.
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This marks the company’s lowest profit since the July-September quarter of 2021, during which it recorded a loss.
During the quarter, Westlife witnessed a nearly 6% increase in total expenses, contrasting with a 1.6% growth in revenue.
“Margin pressure continues as competition within the category intensifies,” stated Elara analyst Karan Taurani, who also noted that growth prospects will be subdued due to the volatile demand environment.
However, Taurani mentioned that the rate of decline is anticipated to decrease.
Despite the availability of affordable value packs, they have struggled to capture customers’ attention, largely due to the persistent high food inflation in India throughout the year.
During the quarter, Westlife’s same-store sales, which gauge the revenue growth from stores operating for at least a year, dropped to 5%.
Competitors such as Devyani International, the operator of KFC, Sapphire Foods, which runs Pizza Hut, and Jubilant FoodWorks, the franchisee of Domino’s in India, have not yet disclosed their results.
In November of last year, the company faced scrutiny when the Maharashtra state suspended the license of a McDonald’s outlet in eastern Mumbai over allegations of using cheese substitutes and misleading consumers.
Nevertheless, the country’s leading food standards authority had validated the company’s assertions regarding the use of authentic cheese in its products.
US-based McDonald’s fell short of quarterly profit estimates as customers cut back on spending and international sales dampened.
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