KFC India operator Devyani posts slow Q3 revenue growth at 7%, costs spike

CHENNAI/BENGALURU (Reuters) - KFC India operator Devyani International reported its slowest quarterly revenue growth since listing more than two years ago on Friday, as consumers cut back their spending on pizzas and fried chicken amid soaring inflation.

Global fast-food restaurants in India have done everything from rolling out cheaper menu items and launching marketing campaigns with celebrities to prop up demand but are still struggling to attract cost-conscious customers.

Devyani International reported 7 per cent growth in revenue from operations to Rs 8,430 crore ($101.77 million) for the third quarter ended Dec. 31, marking its slowest revenue growth since its listing in September 2021. It missed analysts' estimate of Rs 8,960 crore, according to LSEG data.

This comes at a time when consumers are particularly turning to local pizzerias offering much cheaper pies, denting profits at Domino's operator Jubilant FoodWorks and Devyani's Pizza Hut restaurants.

"Consumer sentiment remains subdued, despite Q3 traditionally being a strong and festive quarter," Chairman Ravi Kant Jaipuria said in a statement.

This, coupled with total expenses jumping nearly 16 per cent from a year earlier, further dented Devyani's margins.

Its earnings before interest, tax, depreciation and amortization (EBITDA) margin contracted to 17.4 per cent from 22 per cent an year ago.

Its consolidated profit slumped nearly 87 per cent to 96.2 million rupees.

However, the company remains optimistic about witnessing a recovery over the next few quarters and is confident of reaching 2,000 stores by end of calendar year 2024, it said.

Shares of Devyani, which declined 6 per cent in January, fell as much as 2.1 per cent after the results.

Earlier this week, Jubilant Foodworks reported a surprise profit fall, while Westlife Foodworld, which runs McDonald's restaurants in southern and western India, posted a bigger-than-expected profit drop.