On Thursday, Westlife Foodworld, the operator of McDonald’s restaurants in western and southern India, reported an unexpected drop in quarterly earnings as increased costs overshadowed higher sales of its burgers and fried chicken.
The franchisee reported that the consolidated net profit after tax declined from 315.4 million rupees in the July-September quarter of the previous year to 223.7 million rupees ($2.7 million).
According to data from LSEG, analysts had anticipated a profit of 319.6 million rupees.
Commodity prices, such as those for cheese and vegetables, experienced a significant increase in the quarter. This led to a surge in expenses, prompting many restaurants to even remove tomatoes from their recipes.
Westlife witnessed a 9.7% increase in total expenses, reaching 5.88 billion rupees.
Nevertheless, revenue from operations saw a 7.4% increase, reaching 6.15 billion rupees, primarily attributable to the introduction of discounted meals and the inauguration of new stores.
In a statement, Chairperson Amit Jatia acknowledged that Westlife had been operating within “challenging market conditions,” while also noting the persistence of “macroeconomic challenges.” He further mentioned the company’s commitment to investing in new stores and expanding its business.
The shares of Westlife, the company overseeing 370 restaurants in regions such as Maharashtra and Tamil Nadu, fell by 2.2%, reducing their year-to-date gains to approximately 11.3%.
The downbeat news comes a day after its fast-food competitor and Domino’s operator, Jubilant FoodWorks, posted a smaller-than-expected drop in quarterly earnings due to cost-cutting and higher demand for its lower-priced pizzas.