Q3FY23 Review: Jubilant Foodworks: SSSG decline is here

2 Feb 2023 , 10:20 AM

Jubilant is going through a perfect storm – demand pressure, industry oversupply and cost inflation. The performance has probably bottomed out with SSSG estimated to be negative (0.3% like-for-like growth – LFL) and Ebitda margin at 22%. However, recovery will be slow and steady with consensus cuts likely continuing for two to three quarters.

JUBI in Q3FY23 reported muted sales growth of 10% YoY, driven largely by avg. store growth of 18%. Sales per avg store fell by 6% YoY and by 2.4% on 3yr Cagr. This was led by weak demand in November and some improvement in December, with January being similar to December. Ebitda margin of 22% contracted by 457bps YoY and was below IIFLe of 24.5%, driven by gross margin pressure and negative operating leverage. Store opening was healthy at 60 new Domino’s stores (YTD-194).

Poor results corroborate IIFL Capital Services view that CY23 will be a tough year for QSR sector, due to a combination of lacklustre demand and excess supply of store additions. And as seen in earlier periods, once demand slowdown sets in, it persists for a few quarters. 

Analysts at IIFL Capital Services cut their EPS by a further 4%-5% and maintain REDUCE with a TP of Rs450.