Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Barbeque-Nation Hospitality Ltd (BOM:543283, Financial) reported an 8.8% increase in consolidated operating EBITDA to INR51 crores.
- Gross margin for the quarter increased by about 400 basis points year-on-year.
- The company opened 4 new restaurants with upgraded designs during the quarter.
- Barbeque-Nation's premium dine-in brands, Toscano and Salt, are growing well and have delivered high operating margins.
- The company plans to add 100 new restaurants by FY27, aiming for a network of 325 restaurants.
Negative Points
- Revenue declined by 5.6% year-on-year to INR306 crores, primarily due to negative same-store sales growth.
- Same-store sales growth (SSSG) was negative at 7.4%.
- The company faced temporary sales impacts due to floods and prolonged rainfall in Dubai.
- Dine-in sales were impacted by Mahatva festivals and general elections in some states.
- The South region showed more significant negative impact on dine-in sales compared to other regions.
Q & A Highlights
Q: How have the trends in same-store sales growth (SSSG) shaped up as the quarter progressed?
A: The one-off issues were largely April and May phenomena. April SSSG was down almost double digits, but it improved in May and June. For the overall quarter, SSSG was around -4.7%. In the first four weeks of July, it was approximately -3%, showing an improving trend.
Q: What is the outlook for the dine-in segment given the current market conditions?
A: Dine-in has been impacted more in the value segment, particularly for Barbeque-Nation. However, premium brands like Toscano and Salt have shown positive SSSG numbers. Regional shifts indicate positive SSSG in North and East markets, while South is more negatively impacted.
Q: What is the plan for new store additions over the next three years?
A: Around 12 stores will be from Barbeque International, 40 stores from premium CDR brands Toscano and Salt, and 50 stores from Barbeque India. The target is to add 100 new restaurants by FY27.
Q: What are the drivers behind the gross margin expansion, and have there been any price hikes in the last year?
A: Gross margin increased by about 400 basis points year-on-year, partly due to reclassification adjustments and better realizations. There was also a price difference due to aggressive promotions in Q1 FY24. Sequentially, gross margin declined by 70 basis points due to increased meat prices and lower-margin express offerings.
Q: What is the CapEx for opening a new Barbeque-Nation restaurant, and what is the expected payback period?
A: The CapEx is approximately INR 3 crores per store, with preoperative expenses accounting for around 10%. The breakeven typically happens in 3 years, and the payback period is also around 3 years.
Q: How do you see the overall demand and consumer behavior for your price points?
A: The demand decline has been more in the value segment. Barbeque-Nation, being a value brand, has been impacted, but premium brands like Toscano and Salt have shown better performance. Regional shifts indicate positive SSSG in North and East markets, while South is more negatively impacted.
Q: What is the stable gross margin target for FY25 and FY26, given stable meat prices?
A: The stable gross margin target is around 68% for the full year, considering current pricing structures and expected reductions in meat prices.
Q: How do you plan to make the business immune from the cyclicality of non-veg consumption during festivals?
A: Seasonal factors do impact the business, but sourcing strategies and inventory management help mitigate some of these effects. The focus is on maintaining a balanced portfolio and leveraging premium brands to offset seasonal declines in the value segment.
Q: What is the sensitivity of restaurant operating margin to SSSG?
A: The sensitivity ranges between 40% to 50%. For every 1% SSSG growth, there is a corresponding 50 basis point improvement in the margin.
Q: What is the target number of stores by the end of the year?
A: The target is to reach between 240 to 245 stores by the end of the year, up from the current 219 combined stores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
