(Reuters) -Devyani International, which operates Pizza Hut and KFC restaurants in India, reported a nearly 88% slump in first-quarter profit on Wednesday, as it ramped up advertising to whip up demand that has remained sluggish for months.
The Yum Brands franchisee reported a net profit of 36.9 million rupees ($420,920.55) for the quarter ended June 30, compared with 301.06 million rupees a year earlier.
Popular fast food chains in India have been struggling to grow the average daily spending as urban customers tighten their wallets amid high costs of living and feeble wage growth, despite easing inflation.
Yum’s franchisee partners, Devyani and Sapphire Foods, both of which operate Pizza Hut and KFC in India, have also turned to offering heavy discounts on meals amid promotional launches.
For the quarter, Devyani offered nine fried chicken pieces for 299 rupees, in a deal called ‘epic savers’. It also offered two side dishes and a free Pepsi bottle with a medium-sized thin crust pizza at its Pizza Hut restaurants.
Still, the average daily spending fell to 98,000 rupees from 104,000 rupees a year ago at KFC chains, and to 33,000 rupees from 36,000 rupees at Devyani’s Pizza Hut restaurants.
“While near-term macro factors have led to a phase of soft consumer demand, we see a better outlook for the industry in coming times,” non-executive chairman Ravi Jaipuria said in a statement.
Revenue from operations rose 11.1% year-on-year to 13.57 billion rupees, benefitting from a restaurant count that was higher by over 300 year-on-year, including the addition of the recently acquired ‘Biryani by Kilo’ chain.
However, lower margins weighed on profitability.
Core profit margins contracted to 15.1% from 18.3% a year earlier, the company said.
($1 = 87.6650 Indian rupees)
(Reporting by Ananta Agarwal in Bengaluru; Editing by Harikrishnan Nair and Sonia Cheema)
