New Delhi: Devyani International Ltd, the operator of KFC restaurants in India, has reported a decline of 21% in its fourth-quarter profit. The company attributed this slump to increased expenses and a decrease in demand caused by inflationary pressures on consumers. In an exchange filing, Devyani International revealed that its consolidated net profit for the quarter ending March 31 stood at 607.2 million rupees ($7.4 million).
The challenging economic conditions in India have significantly impacted consumers, who have been grappling with high prices of essential commodities such as milk and fuel. As a result, discretionary spending has taken a hit, with individuals becoming more cautious about their expenses. Additionally, Devyani International’s Pizza Hut stores are facing fierce competition from local brands offering more affordable alternatives, as well as Domino’s Pizza, which is operated by Jubilant Foodworks in India.
Devyani International, which also holds exclusive franchise rights for the Costa Coffee brand in India, experienced a substantial increase of 32% in its total expenses compared to the previous year. However, the company saw a promising surge of 28% in revenue from operations, driven by the opening of 66 new stores. Nevertheless, there was a slight decline of approximately 5% in revenue compared to the previous quarter.
This decline in profit at Devyani International is consistent with the performance of other franchisees of Yum Brands, the parent company of KFC. Sapphire Foods India Ltd and Westlife FoodWorld Ltd, the local operator of McDonald’s, have both experienced similar challenges, highlighting the impact of rising expenses and a slowdown in demand.
Despite the current difficulties, Devyani International remains optimistic about the future. Ravi Jaipuria, the Non-Executive Chairman, expressed hope for a rebound in consumer spending during the second half of the upcoming fiscal year. He cited initial signs of inflation stabilizing as a potential positive factor. However, the company’s earnings report had an immediate impact on the stock market, as shares of Devyani fell by as much as 8.6% following the announcement. At the end of trading, the shares were down 4.8% at 173.3 rupees.
In conclusion, Devyani International, the operator of KFC restaurants in India, has reported a decline in fourth-quarter profit due to increased expenses and a slowdown in demand resulting from inflationary pressures on consumers. The company remains hopeful for an improvement in consumer spending in the latter half of the upcoming fiscal year, although its recent earnings announcement led to a decrease in its stock price.