BackYum! Brands continues to report sluggish growth amid India restructuring
Yum! Brands said sales at its India unit fell 9% in the October-December quarter from a year ago, while same-store sales during the same period fell 13%
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Bengaluru: American fast food chain Yum! Brands on Wednesday said sales at its India unit fell 9% in the October-December quarter from a year ago, while same-store sales during the same period fell 13%. Same-store sales refer to sales at outlets open for over a year.
In its earnings report filed to the NYSE, the owner of KFC, Pizza Hut and Taco Bell reported operating loss of $4 million for the quarter and $19 million for the year.
For the full year, sales in India fell 5%, driven by a 13% same-store sales decline. Yum! Brands operates 800 restaurants in India.
During the year, Yum! Brands sold part of its franchise business to a consortium of four funds led by Samara Capital for ₹ 750 crore. These funds jointly acquired franchisees and formed Sapphire Foods with 300 restaurants, becoming one of the largest owners of Pizza Hut franchise in India.
The move lowered the ownership of Yum! in the market.
During the quarter, the India unit refranchised 86 KFC units, reducing equity ownership in India from 25% to 15%, Yum! said in its earnings statement.
One analyst saw the result as a negative for the sector that has been hit by crunch in discretionary spending and fierce competition from fast food chains that have proliferated over the past year-and-a-half.
Abneesh Roy at Edelweiss Securities, in a note dated 4 February, said that food technology companies such as Swiggy are disrupting the way consumers choose fast food.
“The pizza space is facing intense competition from online ordering apps. We expect competitor Jubilant FoodWorks Ltd to report muted ~1% y-o-y SSSG (same-store sales growth) in Q3FY16 (driven by price) on low base of 1.9% y-o-y. SSSG gap between the two peers is likely to be ~14% this quarter," the note added.
“The QSR (quick service restaurant) space remains quite challenging, prompting all players to dole out high promotions," Roy added.
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