India's appetite for pizzas, burgers shrinks, franchisee results show

BENGALURU, Jan 31 (Reuters) - Indians are going out less often for pizzas and burgers, third-quarter results at Domino's and McDonald's local franchisees showed on Wednesday, with analysts noting that tough competition and demand-dampening inflation would strain their earnings in the near term.

Domino's restaurants operator Jubilant Foodworks reported a surprise profit fall, while Westlife Foodworld , which operates McDonald's restaurants in south and west India, posted a bigger-than-expected profit drop.

Quick-service restaurant (QSR) operators in the country have done everything from rolling out cheaper offerings and increasing discounts to cutting packaging costs in a bid to prop up demand but have failed to get Indians to eat out more often amid high inflation.

The same companies were among the biggest beneficiaries during last year's festive session as Indians began dining out more often after several pandemic-ridden years.

The demand slowdown after 2023's high base has not only dragged their earnings, but has also resulted in negative same-store-sales growth (SSSG) compared to the usual 5%.

While demand weakness "might be near the bottom," the industry is unlikely to reach earlier SSSG growth, said Karan Taurani, an analyst with Elara Capital.

The margins of the two companies are also unlikely to see a "significant recovery," according to Amnish Agarwal, analyst at Prabhudas Lilladher, with Taurani also adding that intensifying competition from smaller players would keep margins "strained."

Jubilant's profit of ₹65.71 cr ($7.9 million) was down for a fifth straight quarter, much lower than analyst estimates of ₹90.26 cr, while its revenue growth slowed for the seventh quarter in a row.

Westlife, meanwhile, reported its first revenue fall in three years and its profit of ₹17.24 cr came in far below analyst estimates of ₹33.11cr, as per LSEG data.