Pizza Hut India operator 'cautious' on expansion after 20% sales slump

Sapphire Foods India, a Yum Brands franchisee, on Thursday reported a 20% decline in quarterly same-store sales at its Pizza Hut India restaurants on sluggish demand and said it is "cautious" about opening more outlets.

Demand for pizzas has been slowing over the last few quarters, with restaurant operators pushing up prices in line with higher ingredient costs and as people have been shunning pizzas for fried chicken and burgers.

Sapphire blamed the same-store sales decline at its Pizza Hut India restaurants, which make up roughly a quarter of its revenue, on "tough macro conditions and specifically high competitive intensity in the pizza category."

The decline has also forced Sapphire to rethink its plans to open additional Pizza Hut restaurants.

"In the medium term, we will be cautious with our restaurant expansion plans while continuing to work on improving brand salience and product innovation," Sapphire said.

Net profit fell 43% to Rs 15.34 crore ($1.84 million) for the second quarter ended Sept. 30, below analysts' estimates of Rs 18.19 crore, as per LSEG data.

Shares of Sapphire slid as much as 8.8% post-results.

Globally, Pizza Hut-parent Yum Brands is dealing with slowing customer footfall as high inflation is sapping consumer spending.

Same-store sales at Sapphire-operated KFC restaurants, meanwhile, stayed flat during the quarter.

Revenue from operations, however, rose 14% to Rs 643 crore as Sapphire opened 36 restaurants during the July-September period.

Last month, Domino's India-franchisee Jubilant FoodWorks reported a smaller 1.3% decline in like-for-like sales - a key same-store sales metric.

"Pizza Hut will underperform Jubilant (Domino's) by a very big margin (this financial year) ... Consistency and user experience in the pizza category is one of the best at Domino's," Elara Capital analyst Karan Taurani said.