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.