Release Date: January 29, 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 a 20% year-over-year revenue growth, reaching INR 445 crores.
- The company achieved a 2.6% positive same-store sales growth (SSSG) driven primarily by increased traffic.
- Highest-ever company EBITDA of INR 70 crores, a 48% increase year-over-year.
- The company has successfully built 38 new restaurants this quarter, surpassing their target with a total of 452 restaurants.
- Digital initiatives like the King's Journey have been implemented in 68 restaurants, enhancing customer experience and operational efficiency.
Negative Points
- Geopolitical tensions in Indonesia have negatively impacted the dine-in business, leading to a 1% year-over-year decline in ADS.
- Despite efforts, the Indonesia business has not yet achieved the expected breakeven and has pushed the target to next year.
- The company revised its same-store sales growth (SSSG) guidance from 6% to 3% due to industry headwinds.
- There was a sequential decline in ADS in the India business, attributed to seasonality and weaker-than-expected December sales.
- The company faces challenges in maintaining profitability in Indonesia, with a need for further cost optimization and traffic growth.
Q & A Highlights
Q: Just looking at our employee and OpEx spend despite the aggressive store addition, I see that it's remained flat or even seen a slight moderation versus the last quarter. What led to this kind of movement in these 2 line items?
A: We've been very tightly monitoring our costs at the store level. Our focus is on improving revenue while maintaining tight control over expenses. This approach has allowed us to keep employee-related expenses stable despite opening new stores. (Sumit Zaveri, CFO)
Q: The traffic growth is healthy. Would it be fair to say that the value strategy is driving the majority of these incremental footfalls?
A: We have always maintained a traffic strategy through value. This includes consistent value mechanisms like the INR 99 meal. Additionally, new product introductions and the cafe business also drive traffic. (Rajeev Varman, CEO & Director)
Q: We have revised our guidance on SSSG from 6% to 3%. What has changed since the last call?
A: The industry is currently facing headwinds, which impacted our performance in October, November, and December. We adjusted our guidance to reflect these challenges. (Prashant Desai, Head of Strategy and IR)
Q: On Indonesia, we aimed to take gross margins to close to 60%. Where are we in this journey?
A: We are currently at around 57%. The focus is on driving traffic and optimizing costs. The contribution from Popeyes, which has higher gross margins, will also help improve overall margins. (Prashant Desai, Head of Strategy and IR)
Q: Why has there been an increase in the pace of store expansion despite a challenging demand environment?
A: Store openings are planned 3 to 6 months in advance. We continue to open stores if they meet our criteria for long-term profitability, regardless of short-term market fluctuations. (Prashant Desai, Head of Strategy and IR)
Q: Can you provide quantitative numbers on traffic growth due to the King's Journey experience and table service?
A: We have seen a 6% growth in traffic overall. However, we do not share absolute traffic numbers for competitive reasons. (Unidentified Company Representative)
Q: Despite the value for money strategy, we have shown margin expansion. What are the levers driving this?
A: We have locked in prices when favorable, expanded our vendor base strategically, and benefited from scale. These efforts have helped us maintain and improve margins. (Sumit Zaveri, CFO)
Q: What is the incremental CapEx associated with stores implementing the King's Journey experience?
A: The incremental CapEx per store is around INR 10 lakhs. We are also realigning our tech investments to optimize costs. (Sumit Zaveri, CFO)
Q: How is the Indonesia business managing to reduce occupancy and other expenses despite adding new stores?
A: We have shut down high-rent Burger King stores and opened Popeyes stores with attractive rent-to-revenue ratios. We are also rationalizing costs and working with landlords for better terms. (Sumit Zaveri, CFO)
Q: Will there be any new Burger King stores in Indonesia in the next 24 months?
A: We do not expect to open any new Burger King stores in Indonesia in the next 12 months. We will focus on opening Popeyes stores instead. (Unidentified Company Representative)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
