Jubilant Foodworks, operator of Domino’s Pizza, retrenches 1115 workers in FY17

By: | Published: August 31, 2017 4:39 AM

Jubilant FoodWorks, which has exclusive rights to operate Domino's Pizza and Dunkin Donuts brands in the country, is going slow on expansion.

jubilant foodworks, dunkin donuts, dominos pizza, dominos company, jubilant finances, jubilant statementsJubilant had 1,125 Domino’s stores operational and 55 Dunkin stores at the end of Q1FY18. (Photo: Reuters)

Jubilant FoodWorks, which has exclusive rights to operate Domino’s Pizza and Dunkin Donuts brands in the country, is going slow on expansion and even considering shutting a few unprofitable stores and retrenching staff in FY18. At the end of June quarter, the company had 27,369 employees. The company downsized 1,115 employees in FY17, according to its 2016-17 annual report. The company has also cut down on its expansion plans and is likely to add only 40 to 50 new Domino’s stores this financial year, compared to 100 to 150 stores added in the previous years, said Hari S Bhartia, co-chairman, Jubilant FoodWorks, at a conference call. The company’s main focus is on profitable growth. Throughout FY17, Jubilant FoodWorks shut down 14 Domino’s Pizza and 20 Dunkin Donuts outlets.

In the same period, it opened 103 Domino’s stores. In the first quarter of this fiscal, the company has already downed shutters of five Domino’s Pizza stores and nine Dunkin Donut outlets, and plans to close a few more in FY18. Jubilant had 1,125 Domino’s stores operational and 55 Dunkin stores at the end of Q1FY18. For Jubilant FoodWorks, the thrust really is on cost-cutting and evaluating store performance to improve profitability. If required, it plans to shut down loss-making stores. “We are trying to reduce staff costs, negotiating store rentals and also opening smaller stores to reduce rental costs and plan to shut loss-making stores. Focus on reducing costs and shutting loss-making stores has already helped the company improve profit in Q1FY18 and we would continue with our initiative,” Bhartia said.

In fact, closure of non-profitable stores has already helped the company improve profitability in Q1FY18. According to an Edelweiss report, same store sales growth (SSSG) of 6.5% year-on-year on a soft base of 3.2% year-on-year dip was due to the daily discounting strategy and closure of non-profitable stores. “We estimate 313 bps EBITDA margin improvement driven by 7.9% SSSG in FY18. The company estimates to cut Dunkin losses by half in FY18 as it has closed nine stores in Q1FY18,” said Abneesh Roy, senior vice president, Institutional Equities and Research Analyst, Edelweiss.

Jubilant FoodWorks reported a net profit of Rs 24 crore in Q1FY18 beating street estimates by posting a rise of 26% year-on-year. The PAT also reflects the adverse impact of Rs 9 crore on account of outlet closure. The company’s revenue from operations witnessed a rise of 11.5% to Rs 679 crore, while earnings before interest, taxes, depreciation and amortisation (EBITDA) was up 37.8% year-on-year to Rs 79.6 crore, the highest in the last eight quarters. The company reported an operating margin of 11.7% in Q1FY18 against 9.5% in Q1FY16. The company reported an SSSG of 6.5%, a huge jump from its previous performance of -7.5%, and the highest since Q1FY16.

In the quarter, the company’s employee costs were up 5% year-on-year to Rs 147.07 crore. “We took a number of actions in the quarter towards driving innovation, delivering value and controlling costs, and we are pleased to see that our disciplined focus on driving profitable growth has begun having the desired impact,” Bhartia said. Focus on delivering better value for money and driving innovation has helped bring back growth in Domino’s Pizza.

The company has also made significant progress towards reducing losses and building a sustainable business in Dunkin Donuts, said Pratik Pota, CEO, Jubilant FoodWorks. The company has discontinued its buy one, get one free pizza offer, as it has been impacting its profits.

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