Devyani International Q1 result: Profit plunges 88% amid sluggish demand

Devyani International, which operates Pizza Hut and KFC restaurants in India, reported a nearly 88 per cent slump in first-quarter profit on Wednesday, as it ramped up advertising to whip up demand that has remained sluggish for months.

The Yum Brands franchisee reported a net profit of ₹3.69 crore ($420,920.55) for the quarter ended June 30, compared with ₹30.106 crore a year earlier.

Popular fast food chains in India have been struggling to grow the average daily spending as urban customers tighten their wallets amid high costs of living and feeble wage growth, despite easing inflation.

Yum's franchisee partners, Devyani and Sapphire Foods, both of which operate Pizza Hut and KFC in India, have also turned to offering heavy discounts on meals amid promotional launches.

For the quarter, Devyani offered nine fried chicken pieces for ₹299, in a deal called 'epic savers'. It also offered two side dishes and a free Pepsi bottle with a medium-sized thin crust pizza at its Pizza Hut restaurants.

Still, the average daily spending fell to ₹98,000 from ₹104,000 a year ago at KFC chains, and to ₹33,000 from ₹36,000 at Devyani's Pizza Hut restaurants.

"While near-term macro factors have led to a phase of soft consumer demand, we see a better outlook for the industry in coming times," non-executive chairman Ravi Jaipuria said in a statement.

Revenue from operations rose 11.1 per cent year-on-year to ₹1,357 crore, benefitting from a restaurant count that was higher by over 300 year-on-year, including the addition of the recently acquired 'Biryani by Kilo' chain.

However, lower margins weighed on profitability.

Core profit margins contracted to 15.1 per cent from 18.3 per cent a year earlier, the company said.