Business Today
Loading...

Quick-service restaurants lose out to retailers in Q3

The festive season has been quite disappointing. Though apparel and accessories retailers have also had it bad, they still stand in better stead than quick-service restaurant operators.

Arpita Mukherjee | February 6, 2014 | Updated 18:52 IST
Quick-service restaurants lose out to retailers in Q3
(PHOTOS: Reuters)

Rationalising consumers are not benefiting retailers. This is evident from the third quarter (October to December 2013) results of most companies.

In other words, the festive season, which is usually the best quarter, has been quite disappointing.

And though apparel and accessories retailers have also had it bad, they still stand in better stead than quick-service restaurant (QSR) operators. The former's same-store sales growth (SSG) slowed, unlike QSR companies, which posted negative numbers.

"A consumer's spend is more on apparels than on food products, which means that he/she is finding more value in a shirt or a trouser for Rs 800 or Rs 1,000 compared to spending Rs 500 on a pizza," says Amnish Aggarwal, Senior Vice President at Prabhudas Lilladher, one of India's leading broking houses.

Food service chain Jubilant FoodWorks recently reported disappointing quarterly results due to lesser consumer spend and high cost of raw materials. Gross margin in the third quarter fell 100 basis points to 73.3 per cent, while SSG was down 2.6 per cent as compared to the corresponding period a year ago.

Although the long term story is good, the trend is likely to remain the same for some more time, say analysts.

"People are finding value in spending on durable items, rather than spending on food," says Aggarwal, adding that even coming off food inflation is unlikely to change things.

Abneesh Roy, Associate Director, Institutional Equities Research, Edelweiss Securities Ltd, a leading financial services group, in a note to clients, agrees: "Though we are positive on (Jubilant's) robust brand equity and long-term growth, we are concerned about SSG slowdown over the medium term and the continuous cut in promoter stake."

Companies are tweaking their strategy to benefit from what is working best for them. Lifestyle retailer Shoppers Stop is looking at refreshing and tweaking its product categories, as is Jubilant, which has plans to introduce new product innovations and promotions at its Domino's Pizza outlets to increase trials and repeat orders.

So, while the current quarter (January to March 2014) is likely to be better than the third quarter, it is unlikely to be significantly different.

"These days even the sales trends change month on month… In a broader sense, things are not looking good," says Aggarwal.

 

  • Print
  • COMMENT
BT-Story-Page-B.gif
A    A   A
close