Westlife Foodworld’s December qtr is expectedly appetizing
Westlife Foodworld Ltd kept the ball rolling in the December quarter (Q3FY23), but that was pretty much expected. It clocked the highest-ever quarterly revenue of ₹611.5 crore. This represents 28% year-on-year (y-o-y) growth. The operator of McDonald’s restaurants in west and south India saw an increase in footfalls in the last quarter. This led to same-store sales growth (SSSG) of 20% y-o-y. In Q2, helped by a lower base, SSSG stood at a higher rate of 40%. However, in Q3, average sales per store on a trailing 12 months basis was higher sequentially.
The company gained market share among quick service restaurants, the management said in the latest earnings call. Its menu innovations, such as McCheese burger and KitKat Frappe saw healthy traction among consumers. In Q3, about 57% of overall business was through digital channels.
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Westlife faced inflationary pressures last quarter, but price hikes offset the same to an extent. The company took a blended price increase of 2% in October, taking the total price hike over the last 12 months to 7%. Price hikes have aided Ebitda margin expansion in Q3. The measure was up by 0.5 percentage points y-o-y to 18%, which is encouraging.
The costs of commodities are still elevated, but inflationary pressures have likely bottomed out. While margin tailwinds augur well, a potential slowdown in demand needs closer tracking. In the medium to long-term, Westlife targets to maintain SSSG in the range of 6%-9%, to be primarily driven by growth in guest count.
The company is confident in overcoming a challenging environment on the back of its strategies. It sees opportunities in non-metro towns and continues to capitalize on the demand in metros. In Q3, sales from non-metro towns grew by 1.5 times when compared to metros over the pre-covid base.
To be sure, Q4 is likely to be heavy in terms of store addition. In the nine-month period ended December, Westlife added 17 new restaurants.
As of December end, the company is present across 52 cities through 341 restaurants. Further, it opened six new restaurants in January.
It aims to add 35-40 new restaurants in FY23 against the backdrop of a strong pipeline. Investors would do well to monitor the company’s progress towards store addition. After closing higher by 6.5%, shares of Westlife are down by nearly 10% from their 52-week highs of ₹815.55 apiece seen in December.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.