Westlife Development reported strong numbers for the quarter. The revenue growth was strong at 34.6% driven by new product launches and same store sales growth. The cost of Food & Paper declined by 223bps yoy as percent of net sales leading to improvement in gross margin. EBITDA jumped by 87.9% yoy to Rs18.3cr. EBITDA margin improved by 172bps yoy to 6.1%. EBIT for the quarter turned positive at Rs0.8cr against loss of Rs6.5cr in Q4FY17. Led by positive EBIT and higher other income, company reported PAT of Rs6.6cr against loss of Rs4.1cr.
Company reported strong SSS growth of 25.1% yoy supported by healthy demand, product innovations and strong growth across brand extensions. Further, SSS growth was aided by a favourable base (1% SSS growth in base quarter) and price hike taken post loss of input tax credit in November 2017.
Benefit from higher gross margins and operating leverage was partly offset by loss of input tax credit for the entire quarter across royalty (4.6% of sales vs. 4.3% in 3QFY18) and occupancy & other operating costs (34.4% of sales vs. 32.7% in 3Q).
WLDL highlighted that McCafe sales have grown 4.2x over FY16-18 with average sales per store per day up 1.7x. The format has seen a >80% sales growth in FY18.
McDelivery sales have grown 2.1x over FY16 levels, with the number of delivery hubs increasing to 165 as at end-FY18 vs. 133 as at end-FY16. McDelivery saw a strong ~75% sales growth in FY18.
WLDL plans to add 25 stores in FY19E (25 added in FY18, excluding 6 closures), reaching a store count of 277 by end-FY18. It also intends to expand McCafe (149 stores, post addition of 38 stores in FY18) as well as McDelivery (available in 165 stores). It believes it is on track to achieve its target of 400-500 restaurants by 2022.
WLDL has upgraded FY19 SSS growth guidance to double digits from mid-to-high single digits, which should help drive continued strength in sales growth (22% in FY18).
Management expects continued operating leverage gains as well as cost efficiencies from new stores (ROP 2.0 stores performing as expected).
Westlife Development Ltd ended at Rs. 389.40, down by 20.2 points or 4.93% from its previous closing of Rs. 409.60 on the BSE.
The scrip opened at Rs. 414 and touched a high and low of Rs. 425 and Rs. 375.10 respectively. A total of 2,59,486 (NSE+BSE) shares were traded on the counter. The stock traded below its 50 DMA.
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