KFC operator Sapphire Foods India's Q4 profit halves on higher costs

Sapphire Foods India , the operator of KFC and Pizza Hut restaurants, reported a 57 per cent 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 ₹12.28 crore in the quarter ended March 31 from ₹28.59 crore a year earlier, the US-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.

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Same-store sales at Sapphire Foods' Pizza Hut restaurants dropped 4 per cent 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 per cent 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 per cent to ₹560 crore for Sapphire, which has also been opening new restaurants.

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However, the rise could not cushion the blow from a 17 per cent 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 per cent.