McDonald's India franchisee Westlife's profit misses as costs mount

By Navamya Ganesh Acharya and Praveen Paramasivam

BENGALURU/CHENNAI (Reuters) -Westlife Foodworld reported a smaller-than-expected rise in first-quarter profit on Thursday as higher expenses eclipsed increased sales at the operator of McDonald's restaurants in west and south India.

The franchisee said consolidated net profit after tax rose 22% to 288.3 million rupees ($3.52 million) for the April-June quarter, missing Refinitiv IBES estimates of 321 million rupees.

India is reeling under rising prices of essentials, including tomatoes and cheese, prompting restaurants to introduce new strategies to protect margins and drive sales from consumers looking to cut back spending.

McDonald's in June launched discounted meals comprising McChicken or McVeggie burger, medium Coke as well as fries at 179 rupees, with hefty marketing spends, Westlife Executive Director Akshay Jatia told Reuters last month.

Same-store sales increased 7% from a year earlier, while quarterly expenses rose 14% on higher packaging material and food product prices.

Revenue from operations rose 14% to 6.15 billion rupees, driven by an increase in on-premise sales, which includes dine-in and takeaway, and the addition of four new stores.

Westlife plans to open 40-45 new stores in the year ending March, up from 35 in the previous year.

"Higher pace of store additions in fiscal year 2024 bodes well to boost profitability in coming years," said Amnish Aggarwal, head of research at Prabhudas Lilladher.

Shares of Westlife climbed over 6% on Thursday to hit a record high before paring some of the gains to close 1.5% higher.

The restaurant operator also declared an interim per-share dividend of 3.45 rupees.

The market is focusing on the positives, Centrum research associate Soham Samanta said, pointing to the drop in like-for-like sales at rival and Domino's Pizza franchise Jubilant FoodWorks.

U.S.-based McDonald's reports earnings later on Thursday.

($1 = 81.9400 Indian rupees)

(Reporting by Navamya Ganesh Acharya in Bengaluru, Praveen Paramasivam in Chennai; Editing by Nivedita Bhattacharjee)