The Indian pizza delivery company that is on fire
Jubilant FoodWorks, the master franchisee for American pizza chain Domino’s Pizza and Dunkin’ Donuts in India, is sizzling.
In the last year, shares of the company, which has over 1,170 pizza outlets in the country, have surged over 170% on the BSE as the markets rewarded the management for serving up strong numbers. On Jan. 24, the Jubilant FoodWorks’ shares closed at Rs2,272. A year ago they were trading at Rs838.35.
For the quarter ended December 2017 (pdf), the company posted a revenue of Rs795.2 crore up 20.7% from the year earlier. Same-store-sales growth (SSSG) stood at 17.8% compared to a negative 3.3% a year ago. SSSG is an indicator of the performance of stores functional for over a year. Profit after tax stood at Rs66 crore, up a massive 230.6% over the same quarter of the previous year.
This turnaround began almost a year ago with the appointment of a new CEO (pdf) who has since trimmed costs, opened fewer stores, and rolled out new marketing initiatives. Profitability has, thus, zoomed for the company that has been delivering pizzas to Indian households for over two decades.
This comes despite Indians still being modest spenders. The country’s $48 billion dining out market has faced a slowdown over the last few years as consumers cut back on discretionary spends.
In large cities, competition from new bars and cafes has forced existing players to step up efforts to revive sales. Both Domino’s and McDonald’s have revamped offers, expanded their menus, and launched initiatives like late-night deliveries.
“This rally has been coming in because the management change has been taken very positively by the investors. The new management has cut down on store guidance and decided to focus more on SSSG growth,” Abhishek Navalgund, a research associate at brokerage Nirmal Bang, told Quartz. “The last two quarterly results reflect the strong operating performance as a result of the new strategy.”
The robust growth, added Navalgund, has largely come from Jubilant’s own initiatives related to product quality, affordability, focus on digital, and margin expansion. Meanwhile, recovery in consumer demand, he added, has been gradual.
Jubilant has kept an eagle eye on cost and profitability. In October last year, it scaled back its target for new stores to between 30 and 40 for 2018, down from between 40 and 50 stores it had forecast earlier. Subsequently, the firm launched its biggest product upgrade, the first ever in two decades by Domino’s in India.
Meanwhile, Dunkin’ Donuts, the other franchise that Jubilant owns in India, is expected to turn profitable in the financial year 2019.
Looks like Jubilant’s pizza party will last for a while.
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