McDonald’s India franchisee Westlife reports loss on back of higher costs

Westlife Foodworld, which operates McDonald’s restaurants in west and south India, reported a surprise drop in quarterly earnings on Thursday as increased costs overshadowed higher sales of its burgers and fried chicken.

The franchisee said consolidated net profit after tax fell to Rs 22.37 crore ($2.7 million) in the July-September quarter from Rs 31.54 crore a year earlier.

Analysts were expecting a profit of Rs 31.96 crore, according to LSEG data.

Prices of several major commodities, including cheese and vegetables, shot up during the quarter, resulting in a jump in expenses with many restaurants going as far as taking tomatoes off their recipe.

For Westlife, total expenses climbed 9.7 per cent to Rs 588 crore.

Revenue from operations, however, rose 7.4 per cent to Rs 615 crore, driven by the launch of discounted meals and the opening of new stores.

Westlife operated in “challenging market conditions” and “macroeconomic challenges persist”, Chairperson Amit Jatia said in a statement, adding the company is investing in new stores and plans to grow its business.

Shares of Westlife, which operates 370 restaurants in states like Maharashtra and Tamil Nadu, declined 2.2 per cent, cutting their gains to about 11.3 per cent this year.

The downbeat results come a day after fast-food rival and Domino’s operator Jubilant FoodWorks posted a smaller-than-expected drop in quarterly earnings on cost-cutting and demand for its cheaper pizzas.