Key highlights from Jubilant FoodWorks Limited (JUBLFOOD) Q2 FY23 Earnings Concall
Management Update:
- [00:03:56] JUBLFOOD added 76 new stores and entered 22 new cities in India. Overall, the company opened 134 new Domino’s stores in the first half and said it is well on track to achieve the store guidance of opening 250 stores in FY23.
Q&A Highlights:
- [00:16:16] Nihal Jham of Nuvama asked about RM price like cheese being at an all-time high and if JUBLFOOD will look at a pricing action if that sustains. Ashish Goenka CFO replied that the company had instituted two rounds of price increase earlier in 2022 and late in 2021. Currently, JUBLFOOD is not looking at any further price increase.
- [00:17:30] Nihal Jham with Nuvama enquired that for the new city additions, how is productivity and profitability work from a supply chain cost perspective. Ashish Goenka CFO said, JUBLFOOD is making deeper inroads into Tier 3 and Tier 4 towns, which is part of a concerted strategy and believes the model will continue to work in future.
- [00:27:11] Kunal Vora from BNP Paribas asked about how to look at loyalty program enrollment and its trends. Ashish Goenka CFO answered that the program is doing well. The full mix went live only in Aug. and in 2Q23 JUBLFOOD saw an overall enrollment of 7 million. One-third of orders are coming from enrolled customers.
- [00:33:06] Jaykumar Doshi from Kotak enquired that if it’s right to say that of the 1,250 store network pre-pandemic, the price increases taken has not translated into proportionate revenue increase as consumers are downtrading. Ashish Goenka CFO answered that JUBLFOOD is seeing order and volume growth. But consumers are downtrading to some extent and also reducing item per order. Channel mix is also impacting revenue.
- [00:36:49] Percy Panthaki from IIFL enquired how many more quarters the company expects YoY EBITDA margins to be down as in 2Q23. Ashish Goenka CFO said that almost entire contribution of this margin dilution is because of commodity price inflation as EBITDA margins have been reflecting GM dilution that reduced by 200 bp YonY.
- [00:44:07] Vivek Maheshwari from Jefferies asked about areas of attention and potential for improvement for JUBLFOOD. Sameer Khetarpal CEO replied that JUBLFOOD sees it more as opportunities for growth and margin expansion. One priority is to get the new brands to accelerate faster and also doubling down on Domino’s.
- [00:48:22] Vivek Maheshwari from Jefferies also asked about how the company account for the loyalty program. Ashish Goenka CFO replied that it is accounted as discounts as per the accounting norms. And JUBLFOOD accounted basis a certain ratio of redemption based on the past trend.
- [00:51:17] Arnab Mitra from Goldman Sachs asked about store expansion, any approx. ratio of split store vs. completely new store and if the gap between LFL and SSSG is steady or increasing. Ashish Goenka CFO replied that split stores are one-third of total stores. Also the LFL and SSSG gap is steady. There is no deviation from what’s seen in the past.
- [00:53:10] Arnab Mitra from Goldman Sachs enquired if there is any inflation on the rent side. Ashish Goenka CFO answered that the company has not seen any significant inflation on the rental side. For the existing properties, JUBLFOOD has long contracts in place.
- [00:54:52] Avi Mehta with Macquarie Group enquired about the sudden increase in capex number in 1H23. Ashish Goenka CFO answered that overall capex has followed the company’s store expansion. The per store capex has seen a margin increase in line with inflation of about 8-10%. The increase is also due to some of the opening liabilities. Overall, JUBLFOOD expects capex of close to INR650-700 crores for FY23.