Westlife Foodworld Limited

Westlife Foodworld reported consolidated revenue of Rs. 6.42 billion for Q2 FY26, marking a 3.8% Y-o-Y growth. The quarter was characterized by continued softness in discretionary spending and eating out frequency, with the industry experiencing a 4-6% decline in outside home food consumption during August and September. This led to a Q2 SSSG of -2.8%, with September being a particularly weak month. Despite these challenges, the company achieved an all-time high gross margin of 72.4% and a restaurant operating margin of 19.2%, up 60 bps Y-o-Y, showcasing strong cost discipline.

The digital ecosystem continues to be a pivotal growth driver, contributing approximately 75% of the total revenue and growing over 300 bps Y-o-Y. The company's mobile apps have garnered over 47 million downloads and maintain around 3 million monthly active users, reflecting strong consumer engagement. Westlife is strategically investing in its McDelivery platform, aiming to double sales from this channel in the next two years, which is projected to add an incremental 3-5% to system-wide SSSG over 1-1.5 years.

The company's focus on operational excellence and supply chain efficiencies resulted in a record gross margin of 72.4% and a 60 bps Y-o-Y improvement in restaurant operating margin to 19.2%. Management emphasized that these margins are sustainable due to structural changes and robust cost governance programs. Adjusted Cash PAT for the quarter stood at Rs. 421 million (6.6% of sales), after accounting for an exceptional gain^📎 of Rs. 581 million from a property redevelopment and a loss of Rs. 121 million from an investment impairment and write-off.

Westlife Foodworld opened 8 new restaurants during the quarter, bringing the total count to 450 across 72 cities. The company remains committed to its vision of 580 to 630 restaurants by December 2027. A state-of-the-art location intelligence platform, powered by AI and machine learning, has been deployed to optimize new store performance and identify high-potential white spaces. This data-driven approach has led to the majority of new stores opened in the last 6 months exceeding expectations, and expansion will be primarily funded through internal accruals.

The company continues to innovate and engage customers through new offerings and value campaigns. Notably, the Protein Plus Slice, developed in collaboration with CFTRI, was launched and sold out in one day. Other initiatives include the introduction of Big Yummy Burgers and reinforcement of value propositions like McSaver's Combo at Rs. 69. Various campaigns, such as Independence Day and International French Fries Day, were conducted to enhance guest engagement.

While October showed encouraging signs of recovery with substantial growth over September, the demand environment remains challenging. The South India region, particularly Bangalore, has been identified as a significant drag on the system, experiencing pressure on both delivery and dine-in. The company is actively conducting research and trials to address the specific needs of SEC B and Gen Z consumers in Bangalore, with solutions expected to yield results in the next couple of quarters.