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Yum! India continues sluggish growth amid restructuring


Sales fell 9% in the October-December quarter from a year ago, while same-store sales during the same period fell 13%.

The problems for Yum! Brands in India continue unabated. It operates 800 stores of three brands (KFC, Pizza Hut & Taco Bell) and for the full year (2015), sales fell 5%, driven by a 13% same-store sales decline.

Last year, it sold part of its franchise business to a consortium of four funds led by Samara Capital for INR 750 crore. These funds jointly acquired franchisees and formed Sapphire Foods with 300 restaurants, becoming one of the largest owners of Pizza Hut franchise in India. The move lowered the ownership of Yum! in the market.

Also, during the quarter, 86 KFC units we re-franchised, reducing equity ownership in India from 25% to 15%.

The India problems reflect its global woes. In its earnings report filed to the NYSE, Yum! reported operating loss of USD 4 million for the quarter and USD 19 million for the year.

One analyst saw the result as a negative for the sector that has been hit by crunch in discretionary spending and fierce competition from fast food chains that have proliferated over the past year-and-a-half.

“The pizza space is facing intense competition from online ordering apps. We expect competitor Jubilant FoodWorks Ltd to report muted ~1% y-o-y SSSG (same-store sales growth) in Q3FY16 (driven by price) on low base of 1.9% y-o-y. SSSG gap between the two peers is likely to be ~14% this quarter,” said Edelweiss Securities in its earnings note.

Source: Live Mint

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