Guidance raised; 100 new stores in FY13: Jubilant Foodworks

Ravi Gupta, CFO, Jubilant Foodworks tells CNBC-TV18 that weak consumer sentiment is being witnessed across the country. “Discretionary consumer spending has reduced.”

Its EBITDA margin declined to 18.2% in April-June from 19.4% YoY. It had reported an EBITDA margin of 18.7% last financial year. Pressure on EBITDA is due to high food pricing, Gupta laments.

On same-store sales growth, the company will maintain its earlier guidance of 18% this fiscal. However, despite signs of a slowdown, Gupta says the guidance on opening new stores in FY13 has been raised to 100.

Below is an edited transcript of his interview.

Q: What kind of same-store sales growth are you witnessing now? Do you see the momentum continuing or are there signs of sluggishness creeping in?

A: In Q1 we have witnessed same-store growth of 22%, when you compare with last full year’s same-store growth which was 29.6%. So from last year definitely there is a decline in the same-store growth but when you look at an absolute level 22% same-store growth, it is kind of the best in the industry whether you look at India or maybe across countries.

When you look at stand-alone basis it is definitely lower because discrete spending is a little down from the consumer point of view. We desire higher same-store growth definitely and if the economy improves, if the GDP predictions improves, we can see an upside there.

Q: In which geographies are you seeing any signs of softening of demand?

A: There is no particular geography within India which is downgrading. The weak sentiment is there practically all across India. There is no particular city or region I can ascribe to which is responsible for this slight below expectation same-store growth. But we had given guidance for the full year at 18% plus same-store growth and we are still on target and are still confident that for the full year we can achieve a same-store growth of 18%.

Q: Your margins had cooled off a little bit by about a percentage point in the current quarter. Do you see yourself holding margins here at 18% plus or is that slightly unlikely?

A: For full year FY13, definitely we are expecting about 18% plus margin and when you look at Q4 to Q1, in Q4 our margins were 18.5% but when you reduce the Dunkin' Donuts initial expenses which were 0.6%, so our margins for Q4 last year was about less than 18%. In Q1, despite higher costs in terms of service tax increase, our margins have expanded 18.2%. We had pressure in Q1 on the food costs of about 100 bps food cost had increased and there are two reasons responsible for that.

First was that we deferred the price increase looking at the weak consumer sentiment. Typically we take price increases in the month of April. Now we have taken a price increase in the month of June. The second reason was that in view of the weak sentiment we had increased aggression of our promotions which led to a little higher discounting.