Jubilant FoodWorks Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Jubilant FoodWorks Limited (JUBLFOOD) Q2 FY24 Earnings Concall

• Quarterly Results
  • 5% revenue growth below expectations, but Domino’s sees signs of recovery.
  • Focus remains on delivery growth, store reimaging, loyalty program, and innovative formats to drive growth.
• Domino’s Reorganizes Regional Operations
  • Nearly 1900 Domino’s stores restructured into 7 regions for improved execution, aiming for 3000 stores.
  • Investment in new structure seen as bolstering competitive advantage in operational excellence.
  • Improved new store openings by using data, including out-of-delivery area pings, to identify prime locations, resulting in stronger initial sales.
  • On track to meet guidance of 200+ new Domino’s stores and 13 Popeyes stores this fiscal.
• Long-Term Growth Investment Focus
  • Operating margins invested in new regions, hiring, dining experience, technology this quarter.
  • The company expects these investments to affect short-term margins, but they are viewed as essential for maintaining long-term growth.
• Update on Other Brands
  • Popeyes gaining traction with bold flavors and strong customer response.
  • Hong’s Kitchen metrics ahead of targets with 18 stores across 3 cities.
  • 11 of 21 new Dunkin’ stores in coffee-first format.
• Same-Store Sales Growth (SSG)
  • Domino’s menu innovations and analytics reverse sales decline over the last 2 quarters.
  • Domino’s is more optimistic about SSG in the second half of the year.
  • SSG was lower this quarter due to fasting days and exams, but mature stores still growing at 1%.
  • 20-minute delivery cities seeing positive SSG, Tier 1 cities were positive this quarter due to superior delivery despite rains.
• Store Economics
  • Domino’s re-imaged 33 stores in Q2 and is on track to re-image 100 stores by FY 2024.
  • Re-imaging involves full store revamp for enhanced operations and customer experience.
  • Re-imaged stores called S2 stores, with enhanced furniture, seating, segregated operations, and upgraded systems.
  • Reimagined stores seeing high double digit dine-in growth.
  • Seeing sharpest ticket size increase in dine-in, but no timeline on when overall dine-in will recover.
• Impact on Margins
  • Inflation levels for cheese and vegetables remain elevated, negatively impacting Domino’s margins.
  • Was hit by wheat price increases in the previous quarter.
  • Seeing 8-9% wage inflation in line with minimum wage hikes.
  • Able to absorb wage inflation due to driving higher efficiency.
  • Despite inflationary pressures, Domino’s has taken steps like Project Vijay to drive internal efficiencies and hold EBITDA margin steady.
• Store Expansion and Densification Driving Growth
  • Focus on upgrading delivery with initiatives like 20-minute delivery target showing results.
  • Domino’s remains bullish on growth potential from increasing presence via new stores in under-penetrated locations.
  • Product feedback for Popeyes and performance in Tier 2/3 cities positive so far.
• New Store Openings
  • Q1 typically slower for new store openings, but pace increased from 23 in Q1 to 50 in Q2.
  • Currently in 400 cities, most penetrated QSR chain.
  • Will enter new city if store economics and sales threshold makes sense.
  • Confident that total new stores will be closer to 200 or 225 target this year.
  • Finding enough pipeline to open stores in right locations with high quality.
• Growth Outlook
  • Domino’s targets 5-6% sales growth and 12% unit expansion for 15% overall growth.
  • Underlying consumer demand still remains somewhat muted.
  • Customers downsize pizzas, lowering order values but increasing order count.
• Loyalty Program Success
  • TV Rewards loyalty program launched historically for first time in India for a QSR.
  • Nearly half of orders come from enrolled loyalty members.
  • Seeing high customer retention and frequency for enrolled members.
  • No major increase in discounts from program as seen by gross margin improvement.
• Strong Volume Growth
  • Had best quarter ever for order volume showing real volume growth.
  • Delivery orders have been among highest in recent quarters.
  • Value menu re-launch contributing to volume growth.
  • Confident commissary model supporting value, taste and faster delivery will drive growth.