Festive boost fizzles amid weak QSR demand; Elara backs Jubilant FoodWorks

Consumer discretionary demand remains under pressure despite the festive season, with quick service restaurants (QSRs) witnessing muted recovery and fast fashion showing only selective strength, according to Elara Capital. In its latest sector note, the brokerage said festival-led momentum proved short-lived, while expectations for a sharper rebound in the final quarter of FY26 appear demanding.

 

Festive cheer fails to sustain QSR demand

 

Based on channel checks, Elara Capital analysts said the QSR universe is seeing soft demand trends in the current quarter, even after recent GST rate cuts. While the tax reduction was directionally positive, the brokerage noted that benefits were largely redirected into tactical price cuts across key menus to support volumes, rather than translating into meaningful margin expansion.

 

 

Same-store sales growth (SSSG) data highlights the fragile recovery. October 2025, supported by festive spending, delivered a modest 1-2 per cent year-on-year (Y-o-Y) SSSG across QSR chains. However, this uptick faded quickly, with November-December seeing a 1-4 per cent Y-o-Y decline in same-store sales, indicating no sustained improvement in underlying demand.

 

Elara said the broader macro environment remained subdued through Q3FY26, reflected in muted store traffic. Hence, the brokerage does not expect any material uplift or recovery in SSSG for the quarter, despite seasonal tailwinds.  CATCH STOCK MARKET LIVE UPDATES TODAY

Q4 growth expectations look steep

 

According to Elara Capital, QSR performance over 9MFY26 has been weak, making the implied Q4FY26 SSSG ask rate of ~5.3 per cent Y-o-Y (median) appear challenging. This is especially so given that the base remains positive, with median SSSG of around 1 per cent Y-o-Y for QSR chains and a higher 2.9 per cent Y-o-Y base for burger-focused formats.

 

Given these dynamics, Elara expects revenue downgrades across the QSR space, with a median 2.4 per cent cut to FY26E revenues. The brokerage sees deeper cuts of about 3.3 per cent for fried chicken chains and expects a similar magnitude of earnings downgrades, noting that consensus estimates are broadly aligned with this view.

 

Within the segment, Elara expects Jubilant FoodWorks to deliver mid-single-digit like-for-like (LFL) growth, outperforming peers. Contrastingly, Devyani International and Sapphire Foods, operators of KFC and Pizza Hut, are likely to see low single-digit declines, reflecting persistent traffic headwinds.

 

Fast fashion steadier, Trent leads

 

While QSR demand remains under pressure, fast fashion trends are relatively firmer, Elara said. The brokerage expects Trent’s Zudio to see LFL growth inch up to mid-single digits in Q3FY26, supported by festive demand during Diwali and Dussehra in October 2025. 

Elara estimates Trent’s fashion portfolio may add 58 stores, taking the total count to around 1,125, up nearly 29 per cent Y-o-Y. Zudio is expected to account for 44 additions, while Westside may add 14 stores. This expansion is likely to help Trent accelerate Y-o-Y growth to 19.1 per cent, up from 17 per cent in Q2FY26.

 

Jubilant remains Elara’s top QSR pick

 

Despite the weak demand environment, Elara Capital reiterated Jubilant FoodWorks as its top pick in the QSR space. The brokerage said GST 2.0 offers only a modest and phased tailwind for consumer discretionary, but Jubilant is better positioned than peers to navigate near-term challenges.

 

Elara highlighted three key reasons for its preference, which include margin levers from potential GST-led raw material benefits, calibrated advertising and promotion spends and premiumisation; continued profitable store expansion at a time when peers are stabilising after aggressive growth; and strong alignment with consumer trends, supported by over 70 per cent contribution from delivery.

 

From a valuation perspective, Elara noted that Jubilant trades at around 24x EV/Ebitda (pre-Ind AS) and at a 37 per cent discount to Zomato, even as Jubilant is expected to deliver a 24 per cent Ebitda CAGR over FY25-28E. The brokerage added that any improvement in margins could trigger a meaningful rerating for the stock.

 

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