Sapphire Foods India, the company behind KFC and Pizza Hut eateries, reported its largest quarterly profit drop since going public in 2021. This decline was driven by intensified competition in the domestic market and reduced spending from consumers cautious about inflation, leading them to scale back on fast-food purchases.
The Yum Brands franchisee saw its consolidated net profit fall nearly 69% to 101.4 million rupees ($1.22 million) for the quarter ended Dec. 31.
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According to LSEG data, analysts had anticipated an average profit of 239.6 million rupees.
During the quarter, inflation-hit consumers continued to reduce spending on discretionary items. To address this trend, fast-food outlets in India have been introducing more affordable menu options and ramping up marketing efforts to stimulate demand.
Nevertheless, companies like Sapphire, which offer pizzas starting at INR 169, have also encountered tough competition from local pizzerias offering more affordable alternatives, thereby impacting the profits of larger quick-service restaurants.
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Same-store sales, indicating revenue growth from stores operating for a minimum of one year, dropped by 2% at KFC outlets and experienced a significant 19% decline at Pizza Hut locations.
The company’s total revenue increased by 12% to reach 6.66 billion rupees, while expenses surged by nearly 16%. Consequently, its margins on earnings before interest, tax, depreciation, and amortization (EBITDA) contracted from 19.6% a year ago to 18.4%.
Shares of Sapphire, which also manages Pizza Hut outlets in Sri Lanka, saw a 2% increase following the announcement of the results. This contrasts with a 2% decline in the third quarter.
