McDonald’s India franchisee Westlife reports a 96% PAT profit decline in Q1 FY24

 

INDIA—Westlife Foodworld, McDonald’s India franchisee, has reported a consolidated PAT decline to US$91,012 in Q1 2024 from US$2.4 million as customers reduced spending due to inflation. 

This decline is the company’s lowest recorded profit since Q3 2021, when it reported a loss. 

The company’s expenses increased by 6%, compared to a 1.6% revenue growth in Q1 2024. 

Operational revenues have steadily increased because of the launch of new stores in India from mid-2023. 

The franchisee has also revealed plans to add 45 new stores by the end of 2024. 

Westlife’s same-store sales also declined by 5% during the reported quarter.  

The company is expected to continue with the current weak currency trajectory because of the volatile demand environment. 

Westlife has also blamed the dismal performance on the failure to attract customers with affordable value meal packs and discounts.  

Reduction in consumer spending because of high food inflation between January and March has disincentivized customers from purchasing. 

The company’s share prices fell by 7.7% after the results were announced.  

Quick-service restaurants in India have struggled to attract customers amid high inflation. 

Although rival franchisees like Devyani International, a KFC operator in India, and Sapphire Foods (a Pizza Hut operator) have not released their Q1 2024 results, they are expected to report similar performance trends. 

The franchisee’s performance is also thought to be affected by the recent controversy and allegations of using cheese alternatives and misleading consumers. 

Although India’s food standards authority helped dispel these claims, the controversy has tainted the franchisee’s brand reputation. 

Increased prices of cheese and other ingredients, which contributed to increased costs, reinforced the controversy. 

The report has highlighted the need for cost-cutting strategies to deal with the current problem and protect margins. 

These cost-cutting strategies are necessary because of the high-competition fast food market. 

The company’s appointment of Hrushit Shah as CFO shortly after the results were released shows intentionality in pursuing these cost-cutting strategies.  

Shah has 18 years of experience helping companies implement innovative financial management strategies. 

 

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