Westlife Foodworld Limited — Q1 FY26 earnings call

Call held 23 Jul 2025

Management summary

Westlife Foodworld reported a steady Q1 FY26 with 7% YoY revenue and EBITDA growth, driven by strong gross margin expansion to a historic 71.6% due to supply chain efficiencies. Despite a soft business environment and slower traction in the South, the company achieved its third consecutive quarter of positive comparable sales. Strategic investments in regional leadership and digital channels are expected to drive future growth towards its Vision 2027 targets.

Highlights

  • Third consecutive quarter of positive comparable sales.

  • Gross margin improved by over 160 basis points sequentially to a historic high of 71.6%.

  • Consolidated revenue grew 7% Y-o-Y to ₹6.6 billion.

  • Restaurant operating margin increased by around 80 bps.

  • Operating EBITDA at ₹855 million, higher by 7% over last year.

  • Opened nine new restaurants, taking total count to 444 across 71 cities.

Concerns

  • Persistent soft business environment and muted macro trend.

  • Continued pressure on discretionary spending.

  • G&A expenses were higher due to investments in strategic projects and people-related costs.

  • South region experienced slower traction and is 'dragging down the SSSG'.

Key financials

  1. Consolidated Revenue ₹660 Cr +7%YoY
  2. Same-store sales growth 50%
  3. Gross Margin 71.6%
  4. Operating EBITDA ₹85.5 Cr +7%YoY
  5. Cash Profit After Tax ₹47.4 Cr
  6. Store Count 444 units

What they filed

Q1 FY27: revenue up 11.9%, net profit down 52.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue618 654 603 658 642 +4%671 +3%655 +9%736 +12%
EBITDA76 88 77 85 67 −12%98 +11%87 +13%93 +9%
Net profit0 7 2 1 28 +7597%1 −85%2 +57%1 −52%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Dividend ₹0.75/share (interim)
    I am pleased to share that the Board of Directors has approved an interim dividend of Rs. 0.75 per equity share.

Guidance & targets

Capacity

  • Restaurant Count Capacity · by 2027 · High confidence 580 to 630 restaurants
    Our store development pipeline for the year remains robust and aligned with our Vision 2027 target of 580 to 630 restaurants.

    — Saurabh Kalra

Margin

  • Gross Margin Margin · medium-term · High confidence sustainable at 71.6% and potential to improve
    We believe that the number, which we have just posted is a sustainable number we should be able to sustain and with average volume going up, we should even be able to improve on this.

    — Saurabh Kalra

Profitability

  • EBITDA Margin Profitability · by 2027 · High confidence 18% to 20%
    So, in our Vision statement, we have outlined our aspiration to reach 18% to 20% margin.

    — Resha Mehta (referencing company's Vision statement)

Revenue

  • Same-store sales growth (SSSG) Revenue · year, year and a half · High confidence high single-digit, around 7%
    if you are able to get at least a year, year and a half of high single-digit comp growth around 7% also, we should be able to achieve what we have set out to achieve.

    — Saurabh Kalra

Overall Business

  • Momentum Overall Business · during the year · Medium confidence progressively improving
    Looking ahead, we remain optimistic on progressively improving the momentum during the year.

    — Akshay Jatia

What to watch in Q2 FY26

South region performance improvement

Next quarter / progressively through the year
Current Slower traction, dragging down SSSG
Target Improved SSSG and overall growth in the South

Why it matters

South is a key growth market, and its underperformance impacts overall company SSSG. Management has implemented structural changes.

Is it dragging down the SSSG? Absolutely. So, while we are doing quite well in west, we are not doing as well in south. We did put a few experiments in. Some of them are being green shoots and we need to develop our execution excellence in south specifically...

Risks & concerns

  • Soft business environment and pressure on discretionary spending

    medium

    The company is navigating a persistent soft business environment with continued pressure on discretionary spending, though management remains optimistic for gradual improvement.

    Management acknowledged

  • Slower traction and underperformance in the South region

    medium

    The South region has seen relatively slower traction and is 'dragging down the SSSG', prompting management to augment its leadership team and focus on execution excellence there.

    Management acknowledged

  • Competitive intensity and need for differentiated value

    medium

    The market is competitive and drawn towards affordability, requiring the company to focus on holistic value, product innovation, and being relatable as a brand.

    Analyst acknowledged

  • Increased G&A expenses due to strategic investments

    low

    G&A expenses were higher this quarter due to upfront costs for strategic projects and people-related costs, with benefits expected in a couple of quarters.

    Management acknowledged

Q&A highlights

7 direct
Regional growth nuances and slower traction in the South Direct
In regards to the south, we have been in the south for 20-plus years now, so we have kind of entrenched ourselves well... However, we did feel that for enhanced decision-making, operational efficiency, sharper focus, we wanted to augment our business unit to have a focused view in the south, which is why we have augmented our leadership team in the south.

Highlights a key regional challenge and management's specific structural response to improve performance in a lagging market.

Asked by Devanshu Bansal

Higher HO (Head Office) costs and G&A expenses Direct
So, the majority of the cost is on account of certain strategic projects that we have kicked off. It is on account of upfront cost that we have incurred for those strategic projects, the benefit of which you will see in couple of quarters down the line that has led to slightly higher G&A cost.

Explains a temporary increase in overheads, linking it to strategic investments expected to yield future benefits, providing context for current quarter's profitability.

Asked by Devanshu Bansal

Discrepancy between restaurant operating margin growth and pre-IndAS EBITDA growth Partial
So, Aditya, just answering your first question, I think you spoke about the difference between ROM and operating EBITDA, right? And we did call out that our G&A expenses have been a little higher this quarter due to investments in strategic projects and people-related costs. So, that is probably the difference. And I will ask you to take this offline with Chintan if required.

Highlights a potential area of concern regarding the translation of operational efficiency to overall profitability, with management attributing it to G&A but suggesting offline discussion for accounting specifics.

Asked by Aditya Soman

Sustainability of gross margin expansion Direct
I think gross margin was always a part of it. We believe that the number, which we have just posted is a sustainable number we should be able to sustain and with average volume going up, we should even be able to improve on this.

Confirms management's belief in the structural nature of the gross margin improvement, suggesting it's not a one-off and can be maintained or even enhanced.

Asked by Gaurav Jogani

Average Unit Volume (AUV) decline and strategy to drive it up Direct
I think one immediate response to your question is our entire focus on value for money and that is not only about price, but it is more about being relatable as a brand, having the right offerings across occasions for our customers. That is our number one priority, but that again is relevant for both west and south.

Addresses the challenge of declining AUV by emphasizing a value-for-money strategy and brand relevance to drive customer engagement and spending.

Asked by Gaurav Jogani

Competitive intensity and pricing strategy Direct
What we want to be able to do is not only think about affordability and value, but what truly matters to the consumer... Some of the launches are planned in the next two quarters. You will see we are focusing on our core, yet trying to do things, which are little away from what everybody else is doing right now.

Provides insight into the company's competitive strategy, focusing on differentiated value propositions and upcoming product launches rather than just aggressive pricing.

Asked by Tejash Shah

Bridging the EBITDA margin gap to 18-20% by 2027 Direct
If you are able to do this, we believe we have done a good job in terms of being able to keep our break evens and cost in control. So, if you are able to get at least a year, year and a half of high single-digit comp growth around 7% also, we should be able to achieve what we have set out to achieve.

Connects the ambitious long-term EBITDA margin target to specific SSSG expectations, providing a clear pathway for investors to track progress.

Asked by Resha Mehta

McDonald's deal (Ranveer Singh Meal) availability pan-India vs. regional strategy Direct
So, the first answer is, no. Ranveer Singh Meal is not available with us... So, there is freedom within the McDonald's framework in which we got to get to do what is right for our business and our customers.

Clarifies the regional autonomy within the McDonald's franchise model in India, indicating that product launches are not necessarily pan-India and are decided by individual licensees.

Asked by Amruta

2 min read 5 chapters

Detailed narrative

Q1 FY26 Performance Overview

Westlife Foodworld commenced FY26 with a steady performance, achieving its third consecutive quarter of positive comparable sales despite a persistent soft business environment. Consolidated revenue for the quarter stood at ₹6.6 billion, marking a 7% year-over-year growth, with same-store sales growth (SSSG) at 0.5%. The company reported an Operating EBITDA of ₹855 million, also up 7% over the last year, and a cash profit after tax of ₹474 million, representing 7.2% of sales.

Strategic Initiatives & Regional Focus

To address regional nuances and improve performance, particularly in the South where traction has been slower and 'dragging down the SSSG', Westlife Foodworld is strengthening its regional leadership team. This augmented structure aims to enhance decision-making, operational efficiency, and better cater to customer preferences. Additionally, a new vertical focused on long-term initiatives (Horizon 2 projects) with a strategic outlook beyond 2027 has been established to ensure continued market leadership.

Margin Expansion & Operational Efficiency

A key highlight of the quarter was the significant improvement in gross margin, which increased by over 160 basis points sequentially to a historic high of 71.6%. This expansion was attributed to structural changes that unlocked supply chain efficiencies. Furthermore, restaurant operating margin saw an increase of approximately 80 basis points, reflecting a strong focus on operational excellence and cost governance, contributing to resilient performance despite top-line pressures.

Digital & Network Expansion

Digital channels continue to be a significant driver of growth and customer engagement, contributing around 75% of total sales. The company's digital ecosystem, including the McDelivery app and My McDonald's reward program, boasts over 44 million cumulative downloads and more than 3 million monthly active users. In terms of network expansion, nine new restaurants were opened this quarter, bringing the total count to 444 across 71 cities, aligning with the Vision 2027 target of 580 to 630 restaurants.

Long-Term Vision and Profitability Targets

Westlife Foodworld remains committed to its Vision 2027 targets, which include an aspiration for an EBITDA margin of 18% to 20%. Management indicated that achieving high single-digit comparable sales growth, specifically around 7%, for a year to a year and a half, would be crucial to reaching these profitability goals. The company expressed optimism for progressively improving momentum throughout the year, driven by multiple growth initiatives and a belief that the business has passed its bottom.

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