Pizza Hut India operator misses Q1 estimates on weak demand, surging costs

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Sapphire Foods India, which operates the Pizza Hut and KFC chains of restaurants, reported a larger-than-expected decline in its first-quarter profit on Tuesday, as costs rose while it struggled to entice budget-conscious customers.

The Yum Brands franchisee reported a consolidated net profit of Rs 8.52 crore ($1.02 million) for the quarter ended June 30, missing analysts estimate of Rs 17.39 crore, according to LSEG data.

India's quick-service chains have been struggling to attract customers amid persistent inflation, which remained around 5 per cent during the quarter.

Financially-strained consumers have been cutting back on dining out and ordering in.

Prices of key raw materials including cheese, chicken and tomato have also been rising.

Sapphire Foods India's revenue from operations rose 10 per cent to Rs 718 crore, but came short of analysts' estimate of Rs 723 crore.

The company said prices of ingredients rose nearly 10 per cent, expanding its total expenses by 13 per cent to Rs 712 crore.

Sapphire's same store sales fell 6 per cent and 7 per cent, respectively, for its KFC and Pizza Hut outlets in India.

The company, which also operates KFC and Pizza Hut chains in Sri Lanka and Maldives, said the "KFC chain was impacted the most" by a shift in the dates of a festival when Hindus typically reduce consumption of meat.

Rivals McDonald's India operator Westlife Foodworld reported a plunge in first-quarter profit amid frail demand, while Burger King's India operator Restaurant Brands Asia reported a narrower first-quarter loss as offers and discounts swayed customers.

Devyani International, which also operates KFC outlets in the country, and Domino's India-franchisee Jubilant FoodWorks have yet to report results.