India QSR Yum India reports -1% SSSG in Q114: JPMorgan

India QSR Yum India reports -1% SSSG in Q114

Yum! Brands (covered by JPM US analyst John Ivankoe) reported 1Q14 earnings last night. Same Store Sales growth declined -1% in Q114 for Yum India (vs -4% in Q413, flat in Q313, +2% in Q213). Pick up from Q413 level could be attributed to a favorable base to some extent.

Details of Yum Restaurants India Q114 performance

· India Division reported -1% SSS growth. System sales increased by 21%, prior to foreign currency translation. This increase was driven by unit growth of 25%.

Yum Brands India Same Store Sales Growth Trend

Source: Company data

While consumer demand continues to remain subdued, most QSR players (including Yum) have maintained a high level of promotional intensity to enhance customer footfalls. Pizza Hut has continued with their Wednesday “Buy one Get one free offer” (which Dominos has stopped) and have come out with a new product – Big Pizza (10.5 inch pizza) which is available at Rs199 (for veg) and Rs269 (for non-veg). They have gone ahead with national advertising for this new product offering more value for money to consumers.

· India division has registered revenues of US$23Mn and an operating loss of -US$3Mn in Q114.

Yum India Business Summary P&L

India P&L (US$ Mn)	1Q13	1Q14
Total Revenues	20	23
Company Restaurant Expenses	17	21
General and Administrative Expenses	4	4
Franchise and License Expenses
Closure and impairment expenses		1
Total Expenses	22	26
Operating Profit	-2	-3

Source: Company

· Yum Brands has put into effect a new financial reporting structure beginning Q114. As a result, 28 franchised stores in Mauritius are no longer included in the India Division and are included in the KFC and Pizza Hut Divisions. As of Q114, Yum India operated 707 restaurants in India – KFC (337), Pizza Hut Casual Dining (184), Pizza Hut Delivery (181) and Taco Bell (5).

Yum India Business Store Count

India Units	Q1CY14	Q1CY14 YOY (%)
Traditional Restaurants	707	25%
KFC	337	29%
Pizza Hut Casual Dining	184	8%
Pizza Hut Home Service	181	39%

Source: Company, * Annual Rate of Change, ** Total includes 5 Taco Bell units

· For the India Division, Q114 includes the months of January through February 2014

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