Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Restaurant Brands Asia Ltd (BOM:543248, Financial) reported positive same-store sales growth for the ninth consecutive quarter.
- The company has expanded to 456 restaurants in 107 cities over the past 10 years.
- Gross margins have improved by 110 basis points year-over-year, now standing at 67.6%.
- The company has introduced innovative menu items and value strategies, such as the 2 for INR 79 and 2 for INR 99 promotions, which have driven traffic.
- Digital initiatives, including self-ordering kiosks and the BK app, have significantly enhanced customer experience and operational efficiency.
Negative Points
- The geopolitical crisis in Indonesia has negatively impacted sales, leading to a 5.4% negative same-store sales growth in the region.
- Despite efforts, the company reported an EBITDA loss of IDR 17.3 billion in Indonesia.
- Utility costs have increased due to extreme heat, impacting overall profitability.
- The delivery mix has slightly decreased from 45% to 42%, despite expectations for it to rise due to the heat wave.
- The company faces challenges in achieving cash breakeven in Indonesia, requiring further sales growth and operational adjustments.
Q & A Highlights
Q: Can you split your current quarter performance between price increase and volume increase?
A: The entire growth has come through traffic growth. Our focus is on a value-led strategy, and the growth is traffic-led. We will see some price corrections going forward, but the current quarter's growth is primarily driven by traffic. (Sumit Zaveri, Group CFO and Chief Business Officer)
Q: What is the current profitability difference between online and offline channels?
A: We can't share exact details, but we are working on improving overall profitability by repositioning our delivery pricing and launching new categories like Cafés and snacking products. (Sumit Zaveri, Group CFO and Chief Business Officer)
Q: How has the demand in India been on a month-on-month basis?
A: We expect a strong recovery in the second half of the year. Despite a tough last quarter, we have maintained positive traffic growth for nine consecutive quarters. We anticipate higher traffic and same-store sales growth in the future. (Rajeev Varman, CEO, Whole-Time Director)
Q: What is the contribution of BK Café in existing BK Café stores?
A: Despite doubling the number of cafés, we have maintained average daily sales. We expect this to more than double in the future. (Rajeev Varman, CEO, Whole-Time Director)
Q: Will the 2 for INR 59 and 2 for INR 99 offers be permanent?
A: The value strategy is permanent, but the specific offers will change from time to time. We balance value with premium offerings to drive traffic and maintain profitability. (Rajeev Varman, CEO, Whole-Time Director)
Q: Do you see more rationalization of BK stores in Indonesia?
A: We have rationalized the portfolio and are now focused on growing the existing restaurants. We have a strong team and a clean asset base ready for growth once geopolitical issues subside. (Rajeev Varman, CEO, Whole-Time Director)
Q: What same-store sales growth is needed for cash breakeven in Indonesia?
A: We need to reach sales levels of around IDR 20 million to IDR 20.5 million. We are currently off by about IDR 2 million. We have taken steps to rationalize the portfolio and reduce corporate G&A. (Sumit Zaveri, Group CFO and Chief Business Officer)
Q: How do you see the use of price levers going forward?
A: It's a balanced approach involving menu architecture, value propositions, and premium offerings. We don't rely on a single lever but use multiple strategies to drive traffic and maintain profitability. (Rajeev Varman, CEO, Whole-Time Director)
Q: Are there more cost efficiencies to be realized?
A: We are about 25-30% there. There are still structural changes and efficiencies to be implemented, which will be evident in the coming months. (Rajeev Varman, CEO, Whole-Time Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
