Even as Jubilant Foodworks’ peer, Yum! Brands India continued its disappointing performance in the December 2015 quarter, investors have reacted less negatively this time. The share price of Jubilant Foodworks is down 1.3 per cent on the National Stock Exchange. When Yum! had reported its September 2015 quarter, Jubilant’s share price had tanked over 5 per cent.

A major reason for the mild negative reaction this time could be that Jubilant’s stock has already been battered by investors and has declined 22 per cent in 2016 till date.

Yum!, which operates a cumulative 800 Pizza Hut, KFC and Taco Bell outlets in India, has reported a 13 per cent decline in same store sales growth (SSSG) in the December 2015 quarter despite a favourable base of a negative 10 per cent SSSG in the same quarter last year.

“This meant Yum has seen nine consecutive quarters of negative SSSG, reflecting challenges for all QSR players (KFC is facing heightened competitive intensity in burgers; the pizza space is facing intense competition from the online ordering app,” Abneesh Roy, analyst at Edelweiss Securities pointed out in a note.

As a result, expectations are low from Jubilant in the December 2015 quarter even though there could be a positive surprise on the SSSG front given the 3.9 per cent year-on-year rise in the first half of FY16. However, on the flip side, the base in the same quarter last year i.e. the December 2014 quarter, was high at 2 per cent. Analysts expect only a 1 per cent SSSG in the December 2015 quarter — the lowest in the last five quarters led by price hikes.

The one year forward valuation of Jubilant Foodworks has come off considerably. The outlook for the quick service restaurants industry, including the company, remains challenging and cautious.

comment COMMENT NOW