Domino's India operator beats quarterly profit view

Domino’s India operator Jubilant Foodworks beat first-quarter profit estimates by a wide margin on Wednesday as lower-priced menu items and free deliveries bolstered demand even as other fast-food franchisees struggled.

The company reported profit of 917.6 million rupees ($10.49 million) for the quarter ended June 30, compared to a year ago profit of 558 million rupees.

Analysts on average were expecting a profit of 645.6 million rupees, according to data compiled by LSEG.

Urban Indian consumers are cutting back on non-essentials amid high living costs, denting same-store sales at budget retailers like Trent and fast food chains including Pizza Hut operators Sapphire India and Devyani International.

Jubilant is an outlier in this environment, having reported double digit like-for-like sales growth for atleast three quarters.

In the reported quarter ended June, like for like sales at Domino’s India restaurants grew 11.6%, led by 20.1% growth in delivery.

Sapphire’s same store sales at Pizza Hut India fell 8% in the same period, while Devyani’s fell 4.2%.

Jubilant has not raised prices on average in more than ten quarters, opting to cut costs to drive profitability.

In addition to providing value combinations and expanding store count, it has also waived delivery fees on app orders, while sharpening its focus on 20-minute deliveries in dense metros.

Rival Devyani, on Wednesday, said it is taking cues from Jubilant’s success with its 20-minute delivery model, and strengthening its own food-delivery business.

“Jubilant is doing a far, far better job versus what we are doing..because it is a delivery first brand,” a Devyani executive said on a post-earnings call with analysts.

Jubilant’s efforts drove first quarter revenue higher by 17%to 22.61 billion rupees.

However, its consolidated core profit margin contracted to 19.4% from 19.8%, due to a higher mix of delivery and investments to power sales growth.

($1 = 87.4380 Indian rupees)