Jubilant FoodWorks, which operates Domino's Pizza and Dunkin Donuts outlets in India has revised its store addition guidance downwards to 30-40 Dominos stores from 40-50 stores that the company shared in Q1 as it focuses on driving growth across existing stores and closing unprofitable ones.
Jubilant FoodWorks, which operates Domino’s Pizza and Dunkin Donuts outlets in India has revised its store addition guidance downwards to 30-40 Dominos stores from 40-50 stores that the company shared in Q1 as it focuses on driving growth across existing stores and closing unprofitable ones. Capex for the full year FY18 was pegged at Rs 130 crore. The company will focus on improving productivity at existing stores, Pratik Pota, CEO of Jubilant FoodWorks said in an investors call following it earnings for Q2 FY2018. During the quarter, Jubilant closed 1 Domino Pizza and 5 Dunkin Donut store and incurred expenses of Rs 1.6 crore which was reflected in depreciation expenses of Rs 32.6 crore. Meanwhile Jubilant will also focus towards driving profitability for Dunkin Donuts and said that it is expected to achieve break-even by FY19. “We will be arriving at a profitable and a sustainable model for Dunkin,” Pota said. The company seeks to half losses at Dunkin in FY18 and focus on donuts-coffee combo against burgers and closure of unprofitable stores. Pota added the to drive profitable growth and build a sustainable model for Dunkin the company will start looking at smaller format stores.
Further, it is looking to simplify the menu, to reduce the labour costs. Dunkin Donuts led a 135-basis points margin impact on the company’s P&L during the July-September quarter against 244-basis points in Q2FY17, according to the management. The company emphasised that it has made efforts to rationalise the costs. Pota said that the company negotiated rentals down hard, negotiated media buying cost down hard, rolled back discounts and had sharp control on overheads. The depreciation and amortisation expenses fell 11% and other expenses which includes cost of manufacturing and advertising expenses fell over 1% year-on-year. However, there was a 13% spike in cost of raw material consumers on back of product upgrade strategy launched in August and food inflation.
The cost rationalisation also aided profitability and the company reported strongest EBITDA margins in 3 years at 14.1% . The company, however, reduced the guidance on store growth to 30-40 and will selectively open new stores relying on scientific and robust selection of new sites. Pota said, the markets show potential to opening new stores and store expansion pace will pick up from Q3FY18. Jubilant reported 9% jump in top-line to `727 crore and 5.5% same-store sales growth largely on back of volume growth following the new Domino’s Pizza range with upgrades.