Retail: SSSG deteriorates further …

15 Nov 2023 , 10:41 AM

In Q2FY24, SSSG for most QSR companies declined indicating the persistent weak demand. Key takeaways 1) Pizza QSRs were the most impacted among other QSRs while JUBI performed relatively better than both Pizza Hut (PH) franchisees. 2) QSR weakness was felt the most in Pizza cuisine a few quarters earlier, but now other cuisines are also witnessing pressure 3) Overall net store additions in H1FY24 at 457 declined 25% YoY. 4) Ebitda margin (pre Ind AS) for the sector declined 225bps yoy even as gross margin expanded due to operating leverage impact 5) Capex per store was up ~15-20% on account of backend capex and inflation. 

Store opening 

• JUBI added 50 net Domino’s stores in Q2 (72 in H1) and re-iterated its guidance of adding 220-225 Domino’s stores in FY24. Management mentioned their plans of re-imaging 100+ stores during FY24. 

• Pizza QSRs (DIL and Sapphire) both saw lower addition of PH stores QoQ and YoY as pizza continues to most affected QSR among others. Sapphire has deferred their guidance of doubling PH stores by 1 year, whereas KFC additions fared better for both players. 

• Burger Players store additions were muted at 8 and 9 for Burger king and WLDL in Q2 (13 each in H1). WLDL reiterated its annual guidance of 40-45 additions for FY24. ADS/revenue performance 

• Pizza QSRs ADS/ revenue performance was weakest during the quarter. Among Pizza QSRs, JUBI performed relatively better. ADS growth for fried chicken players was better compared to Pizza QSRs. However for burger peers, ADS growth continued to be higher while BBQ saw decline 

• Pizza Hut ADS for Sapphire declined at -26% YoY and was worst hit while it was -13% for Devyani. JUBI performed relatively better at -7% YoY. SSSG was -20%/-10%/-4% for Sapphire PH, Devyani PH and JUBI respectively. 

• Burger King and WLDL saw SSSG of 3.5% and 1% compared to other players which saw either flat or negative SSSG. This could be due to consumer preference to choose lower ticket food item like a Burger vs Pizza. 

• Overall, the revenue growth for QSR players in Q2 was largely driven by addition of new stores as SSSG continues to deteriorate QoQ and YoY 

• On-premise/off-premise contribution to overall business has largely stabilised for all QSR players. Cost and Margin performance 

• Gross margin expanded for all players YoY (except BBQ) due to easing inflationary pressures 

• Ebitda margin (Post IndAS) contracted for all players (except Burger King) despite GM improvement as Employee cost and other expenses were on a rise. 

• Ebitda margin (Pre IndAS) contracted for all players including burger king. 

• KFC for Devyani saw a higher YoY contraction in restaurant Ebitda margin by 210bps YoY (~170bps contraction QoQ) to 19.4%, a complete contrast to Sapphire KFC which saw 130bps expansion YoY (160bps contraction QoQ) at 19.2%. 

• Pizza Hut for Devyani saw 930bps contraction YoY (~240bps contraction QoQ) to 7.7% vs. 750bps contraction for Sapphire (140bps contraction QoQ) which stood at 7.6%. Capex 

• Devyani and Sapphire saw capex per store increase by 25% and 16% respectively compared to H1FY23 

• JUBI announced capex of Rs.6.5bn in FY23 including Rs.2bn for opening new commissary in Bengaluru. In H1FY24, JUBI saw capex per store increase of 26% YoY