Westlife Development slips after Q4 SSSG declines 6.9%

Westlife Development fell 2.38% to Rs 318.20 after the company said its same-store sales growth (SSSG) declined 6.9% in Q4 March 2020.

Westlife Development, which runs the McDonald's chain of outlets, said its same-store sales growth (SSSG) declined 6.9% in Q4 March 2020, while sales growth fell 1.5% on a year-on-year basis. The quarterly business update was issued post trading hours on Friday, 17 April 2020.

The company said it has delivered strong financial growth quarter after quarter during the pre Covid-19 period in FY2020. It entered CY2020 in a strong position with its January and February SSSG at 12.3% and sales growth at 20.3%. However, India started witnessing growing spread of COVID-19 starting March, and as a result, the business started feeling the heat. Sales began to markedly decline due to blanket restaurant closures done as a result of lockdowns announced by the state and the central governments. Despite witnessing this black swan event in March, the company delivered a robust FY2020 performance. The company opened 24 new restaurants during the year. Additionally, 5 new restaurants were ready, but not operationalised at the time due to mandatory lockdown. The company said that during the lockdown, it had no interruptions in supply for any food, packaging, toys or equipment.

For the full year ended 31 March 2020, the SSSG increased 4.01%, while sales growth on a y-o-y basis has increased 10.3%. The company said it has strong cash reserves, with Rs 156 crore of investments in various mutual funds and other instruments that can be converted to cash at short notice. Additionally, the company has more than Rs 225 crore of free debt lines available.

"The current situation is very unpredictable and evolving daily. These truly are unprecedented time. However, we continue to operate with a long-term mind-set.We are confident of our resilience, but we are not complacent. So while it is difficult to anticipate what a post Covid-19 world will look like, we are taking definitive steps to preserve our financial strength so we are well-prepared for the challenges ahead," the company said in a statement.

The company said it will be rationalising costs, curtailing discretionary expenses and reviewing capital expenditure. The company also expects cost impacts such as write offs, wastage, general and administrative (G&A), etc to be included in Q4 March 2020.

Westlife Development's consolidated net profit surged 107.66% to Rs 14.37 crore on a 16.69% jump in net sales to Rs 430.72 crore in Q3 December 2019 over Q3 December 2018.

Westlife Development focuses on putting up ond operating Quick Service Restaurants (QSR) in India through its subsidiary Hardcastle Restaurants. The company operates a chain of McDonald's restaurants in West and South India, having a master franchisee relationship with McDonald's Corporation USA, through the latter's Indian subsidiary.

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