WESTLIFE - WESTLIFE FOODWORLD LIMITED Share Price

During the Q3 FY26 earnings conference call, management of Westlife Foodworld Ltd. expressed a cautious but optimistic outlook for the business. Mr. Akshay Jatia, President & CEO, noted that while same-store sales growth was negative at 3% for the quarter, there were signs of improvement with consistent guest count levels, particularly in November and December, which resulted in positive growth in January. He emphasized a strategy focused on enhancing the consumer value proposition through five core pillars: value, experience, relevance, profitability, and consistency.

Key forward-looking points included:

1. Revenue Growth: Consolidated revenue for Q3 reached INR 6.7 billion, reflecting a year-on-year growth of 2.6%. Revenue for the nine-month period grew by 4.4% year-on-year.

2. Digital Engagement: Digital sales remained stable at around 74% to 75%, supported by a loyalty program that has resulted in approximately 50 million cumulative app downloads and around 3.5 million monthly active users.

3. Expansion Plans: The company opened 10 new restaurants in Q3, bringing the total to 458 across 73 cities. The goal is to reach 580 to 630 restaurants by 2027.

4. Profit Margins: The restaurant operating margin improved by 150 basis points year-on-year. The management aims to sustain growth without diluting margins, supported by initiatives like the introduction of affordable meal pricing beginning at INR 99.

5. Market Recovery: Management highlighted that recovery in guest counts appears robust, indicating opportunities for sustainable business growth through their strategic initiatives and consumer engagement efforts.

The management acknowledges the challenges ahead but asserts confidence in the strength of their strategies to foster a turnaround in the coming quarters.

Q&A Section Summary: Major Questions and Answers from the Earnings Call

1. Question: "What has been the intent behind the differentiated merchandise-based marketing strategy, and is there any additional cost related to these merchandises?"

   Answer: "Our merchandise strategy is part of a broader framework to enhance guest experiences and drive momentum. These are experiences that connect with Gen Z, and we consider the costs within the holistic combo pricing, so there are no additional costs impacting our margin."

2. Question: "Should we expect moderation in gross margin due to recent promotions?"

   Answer: "We've passed on GST benefits to consumers and optimized operations, ensuring our INR 99 launch is structured to protect margins. Therefore, we don't anticipate a negative impact on gross profit from these initiatives."

3. Question: "Can you shed light on the performance of our delivery channels amid declining numbers?"

   Answer: "While we're focused on improving our own delivery platform, we acknowledge some slow growth on third-party apps. We're actively working with partners to enhance sustainability, with overall digital sales performing well, especially our McDelivery channel."

4. Question: "With higher growth investments, will we see further EBITDA margin expansion as SSG improves?"

   Answer: "Yes, once same-store sales growth turns positive, we expect a notable expansion in EBITDA margins, as our business model supports profitability alongside increasing guest counts."

5. Question: "Regarding the South region's performance issues, is it driven by macro demand or competition?"

   Answer: "The South's underperformance likely stems from a combination of factors, including competitive landscape and our trials to optimize brand relevance. We're confident that our recent experiments will help improve guest counts in that region."

6. Question: "What factors caused the significant decrease in royalty and other operating expenses this quarter?"

   Answer: "The decline in royalties reflects year-end incentives we typically accrue in December. The drop in operating expenses is tied to cost reclassifications, which have simplified our financial reporting without impacting our actual performance."

7. Question: "How is the recently launched INR 99 value proposition expected to affect gross margins?"

   Answer: "The INR 99 offering was tested thoroughly to ensure it isn't margin dilutive. Our pricing strategy considers the overall mix, maintaining margin integrity while increasing consumer traffic effectively."

8. Question: "What was the overall response to the new Protein Slice and Surprise Burger innovations?"

   Answer: "The Protein Slice has been well received as an innovative offering, encouraging more health-conscious customers to consider McDonald's. We'll continue to enhance our product line and build on these insights going forward."

9. Question: "Is the current growth in delivery sales mainly sustainable?"

   Answer: "We're creating a more sustainable delivery ecosystem by focusing on our app and improving partnerships with aggregators. Improvements are being seen across channels, and we expect this growth to persist."

10. Question: "How do you assess the potential for store openings going forward?"

Answer: "We plan to open 20 to 25 restaurants this quarter to compensate for previous slowdowns. Our expansion strategy remains robust as we approach our target of 580 to 630 restaurants by 2027."