Sapphire Foods India, a KFC operator, saw its Q4 profit half because to increasing costs.
Sapphire Foods India, the operator of KFC and Pizza Hutrestaurants, reported a 57% decline in fourth-quarter earnings on Friday, on higher expenses and stiff competition at a time when people also cut back on discretionary spending.
The company’s profit before tax fell to 122.8 million Indian rupees ($1.50 million) in the quarter ended March 31 from 285.9 million rupees a year earlier, the U.S.-based Yum Brands’ franchisee said in an exchange filing.
Consumers in the world’s most populous country have been feeling the inflation pinch in the last few quarters, as prices of essentials have shot up, leaving them with little money to spend on clothing and dining out.
Same-store sales at Sapphire Foods’ Pizza Hutrestaurants dropped 4% in the fourth quarter.
The pizza chain has also been fending off stiff competition in India from local players and – as is the case in other countries as well – Domino’s Pizza, operated by Jubilant FoodWorks.
Sapphire is now boosting marketing for Pizza Hut for the April-June quarter, launching 10 new pizzas.
This comes after Sapphire tasted success with ramped-up marketing for its KFC business, which reported a 2% growth helped by the introduction of new menu items such as popcorn-nachos, a larger advertising budget and tie-ups with multiple celebrities, all in the last few months.
The efforts helped quarterly revenue from operations increase nearly 13% to 5.6 billion rupees for Sapphire, which has also been opening new restaurants.
However, the rise could not cushion the blow from a 17% jump in total expenses.
Earlier this week, rival Westlife Foodworld, which runs the McDonald’s chain of fast-food outlets in west and south India, reported a smaller-than-expected jump in fourth-quarter profit due to inflation.
Shares in Sapphire, which also restaurants in Sri Lanka and the Maldives, dropped marginally, extending their declines this year to nearly 4%.