Same-store sales slump to 26% in Q2.
India’s largest and fastest growing food services company is seeing a moderation in sales growth. After growing sales at nearly 40 per cent over the last financial year, Jubilant Foodworks is feeling the pinch of a slowdown this year. Same-store sales, a good way to measure the health of any retail business, moderated to 26 per cent in the second quarter. While announcing the company’s results, the management conveyed it was seeing initial signs of a slowdown, though these were still early days.
The company’s system sales grew 47.1 per cent in the second quarter to Rs 240 crore. Sales grew 53 per cent to Rs 457 crore in the first half of this financial year. Though, at Rs 23.67 crore (up 28.4 per cent), the company’s profit after tax looks modest, analysts say the company is a turnaround story and is enjoying valuations for its future potential.
Given that it’s still in its growth phase, Jubilant is expecting a capital expenditure of Rs 100 crore this financial year. However, given the prevailing economic scenario, it is also being cautious. The company opened 19 new Domino’s Pizza stores during the second quarter. In the first half, it opened 33 new stores and signed up for 29 others. The cost of setting up a store is Rs 80 lakh.
This cost shows in the company’s books. The share of rent as a percentage of sales has climbed up in the quarter, which shows the company is incurring costs in some stores where revenues are yet to pick up.
While the company’s future growth strategy is in place, gross margins are under pressure. Though it undertook a three-per-cent price rise in August and has another planned for November, it is also expected to face the heat of competitive intensity in the coming quarters.
However, it will soon have another brand to leverage its portfolio, believe analysts. The company tied up with Dunkin’ Donuts in February this year and is currently putting in place the back-end for the new chain. The management says the company is progressing well with laying the foundation for Dunkin’ Donuts launch in India, expected in the first half of calendar year 2012. The initial focus of store roll-out would be the metros, with a phased target of 80-100 stores over a five-year period.
