McDonald's India franchisee Westlife's profit nearly wiped out on frail demand

FILE PHOTO: Visitors are seen at a McDonald's restaurant in Mumbai

By Ashna Teresa Britto

BENGALURU (Reuters) -Westlife Foodworld, the operator of McDonald's restaurants in west and south India, reported a 96% slide in fourth-quarter profit on Wednesday as inflation-weary consumers cut back spending on fast food even as franchisees tried to lure them with discounted prices.

Shares of the company fell as much as 7.7% after the results before closing down 1.7%.

India's quick-service restaurants have struggled to attract customers in the face of sticky inflation and increasing competition from local players.

Westlife said consolidated profit after tax fell to 7.6 million rupees ($91,012.8) for the January-March quarter from 200.9 million rupees a year earlier.

This is the company's lowest profit since the July-September quarter of 2021 when it posted a loss.

Westlife's total expenses rose nearly 6%, compared with a 1.6% growth in revenue during the quarter.

"Margin pressure persists, with category competition growing," Elara analyst Karan Taurani said, adding that growth will remain weak due to a volatile demand environment.

However, the quantum of decline is expected to come down, Taurani said.

Affordable value packs have also failed to draw customers' attention as the pace of India's food inflation has remained high so far this year.

Westlife's same-store sales, which measure the growth in revenue from stores that have been in operation for at least a year, declined to 5% during the quarter.

Rivals KFC-operator Devyani International, Pizza Hut-operator Sapphire Foods and Domino's India-franchisee Jubilant FoodWorks are yet to report results.

The company came under scrutiny in November last year after Maharashtra state suspended the licence of a McDonald's outlet in the east of Mumbai for allegedly using cheese alternatives and misleading consumers.

However, the country's top food standards authority had verified the company's claims of using real cheese in its products.

U.S.-based McDonald's missed quarterly profit estimates as customers cut back on spending and international sales dampened.

($1 = 83.5047 Indian rupees)

(Reporting by Ashna Teresa Britto in Bengaluru; Editing by Sohini Goswami)