Sapphire Foods

Sapphire Foods reported a revenue of ₹775 crores for Q1 FY26, marking an 8% growth over the last year. The company added 11 new restaurants during the quarter, comprising 8 KFC, 2 Pizza Hut in India, and 1 Pizza Hut in Sri Lanka, bringing the total restaurant count to 974. However, consolidated restaurant EBITDA declined by 13% year-on-year, with the margin at 12.2% (down 290 basis points). The consolidated PAT was negative (2) crores or (0.2%), while adjusted PAT was positive at 6 crores or 0.7%.

KFC's Same-Store Sales Growth (SSSG) was flat over the last year, but transaction growth was positive, which management found encouraging. The company invested in the 'Epic Savers' campaign, offering '9 for 299', which contributed to positive transaction growth. New product launches included a gold premium range of Zinger Burger and Chicken Strips. Kiosks have been implemented in 259 stores to enhance customer experience. The restaurant EBITDA for KFC stood at 15.7%.

Pizza Hut experienced an overall revenue decline of (5%) and an SSSG of (8%) in Q1 FY26. The company launched the 'Juicylicious Pizza' range in April '25, receiving positive consumer feedback. Marketing efforts were differentiated, with mass media advertising in Tamil Nadu (an exclusive Sapphire state) leading to a low positive single-digit SSSG, significantly outperforming other markets. Management believes this strategy, similar to Sri Lanka's successful model, can revive the brand and expects alignment on a pan-India rollout within a 'quarter or two'.

The Sri Lanka business continued its robust performance with a 12% SSSG and 15% system growth. Revenue grew by 15% in LKR terms and 19% in INR terms. However, restaurant EBITDA, at 12.7%, was impacted by steep employee cost inflation due to minimum wage changes, which were retrospective from April 1st. To mitigate this, the company implemented a 3%-5% price increase in Sri Lanka from Q2 FY26 and expects some margin improvement for the rest of the year.

For KFC, the dine-in and takeaway channels contributed 57% of sales, with delivery accounting for 43%. This delivery mix saw a 300 basis points increase year-on-year. For Pizza Hut, delivery contributed 50% of sales, with dine-in and takeaway making up the other 50%. Management expects the delivery mix to largely remain range-bound for the rest of the year.

Sapphire Foods announced that its KFC Raiyya store in Punjab received an Indian Green Buildings Council Platinum Award. This is a significant achievement, being the first QSR restaurant in India and the first KFC restaurant globally to receive such an award, highlighting the company's commitment to sustainability.