Sapphire Foods India, the operator of Pizza Hut restaurants within the country, disclosed on Thursday that its quarterly profit had declined more than anticipated due to sluggish pizza demand. The company also expressed a “cautious” stance regarding the expansion of additional outlets.
The net profit of the Yum Brands franchisee plunged by 43 percent to INR 153.4 million (USD 1.84 million) for the quarter ending on September 30, falling short of the analysts’ average expectation of INR 181.9 million, as reported by LSEG data.
Over recent quarters, the demand for pizzas has remained lackluster, influenced by major companies raising prices to align with increased costs of cheese and vegetables. Simultaneously, consumer preferences have shifted away from pizzas toward favoring fried chicken and burgers.
Sapphire reported a 20 percent decline in same-store sales at its Pizza Hut India restaurants during the second quarter. The company attributed this decline to challenging macroeconomic conditions, particularly the heightened competitive pressure within the pizza category.
Sapphire’s total revenue is bolstered by approximately 25 percent through its operations in Pizza Hut India.
The significant decline has also prompted Sapphire to reconsider its intentions to expand its portfolio of 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.
Sapphire reported that same-store sales at its KFC restaurants in India remained unchanged, as customers reduced their meat consumption during specific festival periods.
Nevertheless, the company saw a 14 percent increase in revenue from its operations, reaching INR 6.43 billion, primarily attributed to the opening of 36 new restaurants in the quarter.
On a global scale, Yum Brands, the parent company of KFC and Pizza Hut, is grappling with reduced consumer foot traffic at a time when soaring inflation is eroding consumers’ purchasing power.
Sapphire’s shares, which also have a presence in Sri Lanka, plummeted by up to 8.8 percent following the results, in contrast to a 1 percent increase in the Nifty Smallcap 100.
Last month saw Jubilant FoodWorks, the Domino’s India franchisee, reporting quarterly earnings that defied expectations by being less diminished than anticipated. This was primarily attributed to the company’s cost-cutting initiatives, even as analysts continued to express concerns regarding the demand scenario.
