(Reuters) -Sapphire Foods India, a franchisee of U.S.-based fast-food major Yum Brands, said Pizza Hut’s recovery in India would take longer, after the company reported quarterly revenue slightly below estimates on Wednesday.
Indian operators of U.S. chains such as Pizza Hut, KFC, McDonald’s and Burger King face a double blow, as they grapple not only with stiff competition from local rivals but also shrinking consumer spending due to high living costs and slow wage growth.
Pizza Hut has been among the worst affected over the last two years, as overall dine-in demand remained under stress. The brand brings in more sales from dining rooms compared to its rival, the delivery-focused Domino’s, operated by Jubilant FoodWorks .
To drive demand in the quarter, Pizza Hut gave away a drink and two sides with pizzas in a “super sale” offer, while KFC promoted its “epic weekender” deal, offering up to a 34% discount.
Despite its efforts, average daily sales at Sapphire’s KFC restaurants in India fell 6% sequentially, while Pizza Hut posted a 13% decline sequentially, with the franchisee cutting back on advertising.
“Pizza Hut had a disappointing quarter … The performance in the quarter reflects the longer horizon we will need in reviving the brand,” Sapphire said, adding it would be “cautious” about opening new Pizza Hut stores.
Overall revenue jumped nearly 13% year-on-year to 7.11 billion rupees ($83.98 million) as Sapphire’s store count rose about 10% to 963 restaurants. However, that still fell short of analysts’ estimate of 7.14 billion rupees.
Sapphire’s shares, which fell as much as 5% after the results, closed nearly 1.3% lower.
The company posted a quarterly profit of 17.9 million rupees, a 25% year-on-year fall but surprised analysts who had expected a loss of 82.5 million rupees on average, according to data compiled by LSEG.
($1 = 84.6600 Indian rupees)
(Reporting by Praveen Paramasivam in Chennai and Ananta Agarwal in Bengaluru; Editing by Janane Venkatraman)
