Westlife Foodworld, the operator of McDonald’s restaurants in west and south India, saw a significant decline in fourth-quarter profit, dropping by 96%. This was attributed to inflation-weary consumers reducing spending on fast food, despite efforts by franchisees to attract them with discounted prices. Consequently, the company’s shares fell by as much as 7.7% after the results, ultimately closing down 1.7%.
India’s quick-service restaurants have encountered challenges in attracting customers due to persistent inflation and heightened competition from local players. For Westlife Foodworld, consolidated profit after tax plummeted to 7.6 million rupees ($91,012.8) for the January-March quarter, marking a stark contrast from 200.9 million rupees in the previous year. This represents the company’s lowest profit since the July-September quarter of 2021, when it incurred a loss.
Westlife’s total expenses surged by nearly 6% during the quarter, compared to a modest 1.6% growth in revenue. Elara analyst Karan Taurani noted ongoing margin pressure due to escalating competition in the category, predicting continued weakness in growth amid a volatile demand environment. However, Taurani anticipates that the extent of decline will lessen over time.
Despite efforts to entice customers with affordable value packs, Westlife Foodworld faced challenges as India’s food inflation persisted at elevated levels. Same-store sales, which gauge revenue growth from stores operating for at least a year, declined by 5% during the quarter.
Rivals such as KFC-operator Devyani International, Pizza Hut-operator Sapphire Foods, and Domino’s India-franchisee Jubilant FoodWorks are yet to announce their results.
Westlife Foodworld faced scrutiny in November last year when a McDonald’s outlet in Maharashtra had its license suspended for allegedly using cheese alternatives. However, the country’s top food standards authority verified the company’s claim of using real cheese in its products.
U.S.-based McDonald’s also experienced challenges, missing quarterly profit estimates due to reduced customer spending and dampened international sales.
[Note: $1 = 83.5047 Indian rupees]
