Pizza Hut, KFC India operator's Q2 loss naarrows sharply on strong same-store sales growth

Devyani International, the operator of KFC and Pizza Hut in India, said on Monday its second-quarter loss narrowed sharply, as strong same-store sales growth at KFC outlets offset higher raw material costs, sending its shares up as much as 5.8%.

The company, a franchisee of US-based Yum Brands, said its consolidated net loss narrowed to 2.4 million rupees ($25,301.78), compared with a loss of 218.9 million rupees a year ago.

Here are some key details:

Quick-service restaurant chains in India have increased discounts and value meals to attract cost-conscious consumers as competition intensifies from newer local entrants.

Restaurants have also faced higher input costs, from raw materials to energy, since the start of the conflict in the Middle East, while pressure from local rivals has pushed them to offer promotions to price-sensitive customers.

Same-store sales at its KFC outlets rose 4.4%, marking the third straight quarter of growth.

Consolidated gross margin declined by 60 basis points sequentially but rose by 70 basis points from a year earlier to 68.5%.

Devyani's revenue rose 10.4% to 15.19 billion rupees in the quarter, while expenses rose 8.3%.

"With food inflation firming and interest rates beginning to rise, we expect discretionary spending to stay under pressure," Chairman Ravi Jaipuria said in a statement.

The company said it was on track to meet its full-year forecast of 200-220 net new additions.

Shares were trading 4.3% higher at 125.6 rupees as of 12:11 p.m. IST.