Stocks

No Domino effect of Yum! Brands’ dull showing this time

Priya Kansara Mumbai | Updated on January 19, 2018 Published on February 05, 2016

6blJubilandFd.eps

Q3 expectations are muted for Jubilant FoodWorks too

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

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

13% dip in sales growth

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

“This meant Yum! has seen 9 consecutive quarters of negative SSSG, reflecting challenges for all QSR (quick service) players (KFC is facing heightened competitive intensity in burgers; the pizza space is facing intense competition from online ordering app,” Abneesh Roy, analyst at Edelweiss Securities pointed out in a note.

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

One-year forward valuation of Jubilant Foodworks has come off considerably but the outlook on the quick service restaurants industry including the company remains challenging and cautious.

Published on February 05, 2016
This article is closed for comments.
Please Email the Editor