WESTLIFE - WESTLIFE FOODWORLD LIMITED Share Price

Management provided an optimistic outlook for Westlife Foodworld, highlighting key performance indicators amidst a challenging macroeconomic environment. They noted a steady start to the financial year, with a third consecutive quarter of positive comparable sales, reflecting a 0.5% same-store sales growth (SSSG) and a consolidated revenue of Rs. 6.6 billion, up 7% year-over-year. The gross margin also improved significantly, increasing by 160 basis points sequentially to 71.6%, aided by supply chain efficiencies.

For the upcoming quarters, management mentioned plans to strengthen the regional leadership in South India, focusing on operational efficiency to enhance market penetration. They introduced the "Horizon 2" vertical, targeting strategic initiatives extending beyond 2027 for long-term growth. The aim is to improve accessibility and brand leadership in the South market.

Key financial metrics included an operating EBITDA of Rs. 855 million, a cash profit after tax of Rs. 474 million (7.2% of sales), and an approved interim dividend of Rs. 0.75 per equity share. Furthermore, management revealed their Vision 2027 targets, which aim to expand the restaurant network to 580-630 locations, reflecting a robust pipeline with the addition of nine new restaurants this quarter, reaching 444 restaurants in total.

Management remains confident in creating shareholder value, with expectations that improved consumer spending and innovative offerings will drive growth momentum in the coming year, despite current market softness. They reiterated their commitment to enhance value propositions and boost customer engagement through strategic investments and product innovation.

Major Questions and Answers from the Q&A Section of the Earnings Transcript

Question 1: "Akshay, Saurabh. There is some level of regional nuance to your growth performance. Can you talk a little bit more on your leadership investments in the south region and how do you see growth shaping up there for the remainder of the year?"

Answer 1: "We have been in the South for over 20 years and have a strong brand presence. However, to enhance decision-making and operational efficiency, we've augmented our leadership team in the region. This change aims to drive growth with a sharper focus, and we're confident in executing this strategy."

Question 2: "Is this the reason why our HO cost is slightly on a higher side this quarter?"

Answer 2: "Yes. The majority of the increased cost comes from strategic projects we've initiated, along with some personnel costs. These upfront investments are expected to yield benefits in upcoming quarters."

Question 3: "Given the trend towards convenience, are you directing your expansion towards drive-thrus and metro stations?"

Answer 3: "Yes, our Vision 2027 strategy emphasizes drive-thrus as a key part of our omni-channel model. While we explore metro stations, our priority remains expanding drive-thrus and traditional locations to serve consumers effectively."

Question 4: "What is the typical throughput difference between a drive-thru and other freestanding stores?"

Answer 4: "Generally, the throughput between drive-thrus and standalone stores is competitive, with drive-thrus requiring slightly higher CapEx, around Rs. 15-20 lakh extra. The long-term opportunity from drive-thrus justifies this investment."

Question 5: "Can you explain the gap between restaurant operating margin growth and pre-IndAS EBITDA growth?"

Answer 5: "The difference is primarily due to our higher G&A expenses from strategic investments. While ROM has improved, these expenses have affected the growth of pre-IndAS EBITDA figures."

Question 6: "Are you witnessing any signs of improved same store sales growth (SSSG) in the coming year?"

Answer 6: "Yes, we have seen effective strategies in the West yielding results, and we are optimistic about our initiatives in the South. While SSSG remains stable now, we expect to see improvements through enhanced execution."

Question 7: "How do you approach competition, especially around pricing and market share?"

Answer 7: "We differentiate by understanding consumer needs, focusing not just on affordability but also on value. We intend to maintain our unique position in the market, even as competitors emphasize pricing."

Question 8: "Given the current macro environment, what guidance do you have for SSSG and revenue growth?"

Answer 8: "We do not offer specific yearly guidance but continue to work towards our Vision 2027 targets. We are hopeful for improving momentum and believe we've passed the lowest point."

Question 9: "What portion of the gross margin increase is due to supply chain efficiencies, and have you taken any price increases?"

Answer 9: "The gross margin expansion largely comes from supply chain efficiencies. We made only a small price increase earlier this year and expect to sustain the improvements we've achieved."

Question 10: "Can you clarify your margin aspirations? How do you plan to bridge the gap to 18-20% margins by 2027?"

Answer 10: "Achieving high single-digit SSSG consistently would significantly contribute to our margin goals. We focus on operational efficiencies, customer value, and continuing our growth trajectory."