BackYum! Brands India division reports a sluggish third quarter
Operating loss in the India business unit, which accounts for over 800 restaurants largely between KFC and Pizza Hut, was $8 million in the third quarter
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Bengaluru: The local arm of American fast food chain Yum! Brands reported a 9% decline in its third quarter sales, with 18% decline in same-store sales growth. This is the fourth quarter in which it has seen a double-digit decline in same-store sales growth, indicating sluggish growth in the fast food market in the country.
Same-store sales growth accounts for outlets that have been open for more than a year.
India division system sales decreased 9%, as 10% unit growth was offset by an 18% same-store sales growth decline, the company said in an earnings report for the third quarter ending 5 September. Yum! Brands announced its quarterly results in the home market late on Tuesday evening.
Operating loss in the India business unit, which accounts for over 800 restaurants largely between KFC and Pizza Hut, was $8 million in the third quarter compared with an operating loss of $3 million a year ago—marking its worst performance at least in the past 15 quarters, according to a research report by Edelweiss Securities.
The company shuttered four underperforming stores during the quarter.
The numbers come in even as the company is re-aligning business to push more fast food restaurants in the country by 2020.
In a recent marquee deal for the fast food sector, the company sold one-third of its franchisee business to a consortium of funds led by Samara Capital, with participation from firms including Goldman Sachs, for ₹ 750 crore. The new entity, Sapphire Foods, will now operate 300 restaurants. Other restaurants are managed by New Delhi-based Devyani International and Yum itself.
Equity infusion is likely to help the company boost the network of outlets, a feat unaccomplished by the smaller franchisees.
The numbers, according to a research report by Edelweiss Securities, reflect challenges in the KFC business with heightened competitive intensity in burgers, marked by entry of newer brands such as Burger King and Carls Jr and market share loss in the pizza space driven by Dominos’ swift expansion.
The quick service restaurant space is yet to see any material improvement in demand, the report added.
Yum! Brands operates Pizza Hut (426 stores), KFC (378 stores) and Taco Bell (7 stores) outlets in India.
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