Jubilant Foodworks Q1 FY27 earnings call

Jubilant FoodWorks' Popeyes brand demonstrated significant acceleration in LFL growth, reaching 45% in Q1 FY27, a substantial increase from 9.2% in Q1 FY26. Management attributes this robust performance to superior product quality, efficient store execution, differentiated marketing, and a strong supply chain, positioning Popeyes as a crucial second growth engine for the company. With 90 stores currently, the strategic focus is on increasing Average Daily Sales (ADS) to over 100K and achieving EBITDA profitability, which is identified as the next key challenge for the brand.

To address the declining dine-in traffic and reinforce its market position, Domino's is implementing a comprehensive strategy for its 2,500 neighborhood stores. This includes enhancing basic service quality, attracting new customers through specific offers like 'Best Deals Ever Wednesday', and developing differentiated menus for solo occasions, particularly for ticket sizes below INR250. This initiative aims to stabilize and grow the dine-in and takeaway channels, which have been impacted by the reduction in minimum order values to INR99 and INR49, while leveraging its strong digital adoption for customer acquisition.

Despite achieving healthy gross margins of 75.5% in Q1 FY27, Jubilant FoodWorks faced significant cost headwinds. Consolidated employee costs increased by 15.6% year-over-year (12% standalone) due to wage inflation and new labor code notifications. Furthermore, LPG prices had a notable 120 bps impact on margins, and inflation in cheese, oil, and chicken remains a concern. Management is actively mitigating these pressures through productivity improvements, smart buying, calibrated price increases (1.5-2%), and supply chain efficiencies, aiming for a 200 bps EBITDA margin expansion, with 100 bps already ahead of track.

The company is maintaining its FY27 capital expenditure guidance in the range of INR750-900 crores, consistent with previous years. This capex is strategically allocated primarily towards new store expansion for both Domino's and Popeyes, investments in enhancing the customer experience in existing stores, and continued technology investments to maintain a competitive edge. Supply chain investments have materially decreased from prior years, allowing for a greater focus on revenue-generating capex and ensuring the company remains free cash flow positive, a status achieved in FY26.

Management perceives the overall demand environment as positive, supported by broader economic indicators. While price increases of 1.5-2% were implemented, leading to some volume pressure, the company is balancing discounting, pricing, and packaging to maintain business shape. The strategic decision to reduce the minimum order value to INR99, while leveling the playing field with aggregators, impacts unit economics per order. This necessitates achieving materially higher volume growth to ensure a positive translation into EBITDA.

Domino's recorded a 2.5% LFL growth in Q1 FY27, building on a strong base from Q1 FY26 (11.6%). Management anticipates improved LFL growth for Q2 FY27 compared to Q1 FY27, aligning with their overall target of 5-7% LFL growth for the business. The company's strategy emphasizes driving digital adoption, acquiring new customers, and leveraging brand strength to achieve sustainable growth across all channels, with a long-term goal of building Popeyes into an INR1,000 crores profitable brand.