Reduced Consumer Spend, Increased Expense Forces 21% Drop in Devyani International's Q4 Profit

Devyani International, the operator of KFC restaurants in India, experienced a 21% decline in fourth-quarter profit.

The company attributed this decrease to increased expenses and reduced consumer spending on fast food due to inflation.

According to an exchange filing, the consolidated net profit for the quarter ending on March 31 amounted to 607.2 million rupees ($7.4 million).

In recent quarters, consumers in the world's most populous country have been heavily impacted by soaring prices of everyday necessities like milk and fuel.

As a result, they have been compelled to tighten their purse strings when it comes to discretionary expenses.

Additionally, Devyani International's Pizza Hut outlets are encountering fierce competition from local brands that provide more affordable alternatives, as well as from Domino's Pizza, operated by Jubilant Foodworks in India.

Devyani International, the exclusive franchise holder for Costa Coffee in India, witnessed a significant 32% increase in total expenses compared to the previous year.

Despite this, the company achieved a notable 28% rise in revenue from operations, amounting to 7.55 billion rupees, mainly driven by the opening of 66 new stores.

 However, the company experienced a decline of approximately 5% in revenue compared to the previous quarter.

This decline in profit aligns with the performance of its competitors, Sapphire Foods India Ltd (a Yum Brands franchisee) and Westlife FoodWorld Ltd (the local operator of McDonald's), highlighting the impact of both rising expenses and a slowdown in demand.

Non-Executive Chairman Ravi Jaipuria expressed optimism for a recovery in consumer spending during the latter half of the upcoming fiscal year, citing early indications of inflation stabilization.

However, Devyani's shares experienced a decline of up to 8.6% following the release of their earnings report. As of the latest update, the shares were down 4.8% at 173.3 rupees.