McDonald's India franchisee Westlife Foodworld has delivered a 235 basis points improvement in its gross margin in the April to June quarter, despite higher costs amid inflation, said Akshay Jatia, the Executive Director of the company, while speaking to CNBC-TV18 on Friday.

Share Market Live

NSE

Jatia pointed out that the long term EBITDA margin target is at 18-20 percent. “We are talking about it being a long-term plan, 18-20 percent EBITDA margin is our aspiration."

The franchisee for the US fast-food chain will see an improvement in EBITDA margin going forward. "We continue to deliver 100 basis points improvement in EBITDA year-on-year. So, you will see improvements coming in from what we delivered last year.”

Westlife Foodworld has delivered a 14 percent sales growth, high-single digit same-store-sales growth, which is also the company's plan for FY24.

“For us, it's about growing the whole pie and the percentage of what is off premise and what is on premise, doesn't matter to us as long as we are growing the whole pie. Off premise continue to grow on a very high base. So as a result, we have grown the entire pie and delivered 14 percent sales growth, high single digit SSG, which is exactly what our plan is for the long term,” Jatia noted.

He further said that around 50-60 percent of the new restaurants will be opened in the South. “In our vision plan, we spoke about opening 50-60 percent of our new stores in the south of this base of another 250-300 that we are going to add.”

Westlife may add 40-45 new stores in FY24

Westlife plans to add 40-45 new stores in the year ending March 2024. Jatia said the company already has a pipeline of restaurants that will meet the target for the next five years.

"It's about conversion; our lead times are a little longer. However, we have a very strong team who continue to use the data to find the right locations which we call 1,000 percent locations and open our restaurants with the terms that we always stand for, which is 20-25 years minimum commercial deals. And we remain on track to open 40-45 this year, as well as with our vision 2027 plan," he said.

Westlife Foodworld Q1 earnings

Westlife Foodworld reported a smaller-than-expected rise in first-quarter profit on Thursday as higher expenses took the shine off increased sales at the operator of McDonald’s restaurants in West and South India.

The company said that its consolidated net profit after tax rose to Rs 29 crore for the quarter through June from 24 crore rupees a year earlier.

Analysts on average were expecting the profit to be Rs 32 crore, according to IBES data from Refinitiv.

Total revenue from operations for the quarter also rose 14 percent to Rs 615 crore, driven by an 18 percent increase in on-premise sales, which includes dine-in and takeaway and the addition of four new stores.

Same-store sales for the quarter increased 7 percent from a year earlier, but that was not enough to make up for the 14 percent rise in expenses, with higher prices of packaging material and food products inflating costs.

Shares of Westlife, which rose 25 percent from April to June, rose 5 percent as the restaurant operator declared an interim dividend of Rs 3.45 per equity share.