(Reuters) -India’s Jubilant Foodworks reported a nearly 35% decline in quarterly profit on Wednesday, as the Domino’s Pizza <DPZ.O> franchise’s margins were dented by higher expenses amid accelerated store expansion and elevated food costs.
Jubilant reported a profit of 429.1 million rupees ($4.94 million) for the quarter ended December 31, down from a year-ago profit of 657.09 million rupees.
Weary of persistently high inflation in rent and food costs, budget-conscious Indian consumers have been gravitating towards bargain deals.
Jubilant, like other quick service franchises in the country, has launched value meals to increase footfall in its restaurants and rake in more orders via delivery apps.
The company has launched smaller pizzas priced at around a dollar and lunch combinations for less than two dollars. It has also been waiving delivery fees on its app orders.
As of November last year, the company had not raised prices on its items for at least two years, despite cost inflation, to gain market share.
While these measures have aided topline growth, profit margins have suffered.
Revenue from operations for the third quarter rose about 56% to 25.51 billion rupees.
Same-store sales increased 12.5% year-on-year at its Domino’s restaurants In India. They had declined 2.9% the previous year. Average daily spend in older restaurants rose 12.5% to nearly 86,000 rupees.
However, expenses surged 59.3% year-on-year fuelled by higher sequential store expansions and higher wage and food costs, dragging the core profit margin in the quarter down 163 basis points to 18.7% from last year.
Compared to 73 net store additions in the second quarter, Jubilant added 130 new stores in the third. Of these, 67 were Domino’s stores in India.
Rival Sapphire Foods reported an 18.1% rise in quarterly profit, with same-store sales at its Pizza Hut restaurants in India increasing 5%.
Jubilant’s shares ended 3% lower after the results.
($1 = 86.8775 Indian rupees)
(Reporting by Ananta Agarwal in Bengaluru; Editing by Eileen Soreng and Mrigank Dhaniwala)
