Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Restaurant Brands Asia Ltd (BOM:543248, Financial) has successfully expanded its footprint in India, reaching over 500 restaurants, marking significant growth since its inception.
- The company has focused on enhancing its dine-in traffic post-COVID, showing positive sales and traffic growth in this segment.
- Digital transformation is a key focus, with 90% of sales being digital and 437 restaurants equipped with self-ordering kiosks, enhancing customer experience and operational efficiency.
- The company has improved its delivery profitability by 70 basis points in Q3, indicating a strategic focus on enhancing margins.
- In Indonesia, despite geopolitical challenges, there are signs of recovery with positive traffic trends in recent months, suggesting a potential turnaround.
Negative Points
- Same-store sales growth (SSSG) in India was flat at negative 0.5%, indicating challenges in driving organic growth.
- The company faces significant challenges in Indonesia, with a reported company EBITDA loss of IDR39.5 billion, highlighting ongoing financial struggles.
- Despite improvements, the average daily sales (ADS) in India have been impacted by new store openings, which typically take two years to reach average sales levels.
- The geopolitical situation in Indonesia has negatively affected consumer sentiment towards US brands, impacting restaurant traffic.
- There is a need for continued cost optimization in Indonesia, including rent reductions and overhead cuts, to achieve profitability.
Q & A Highlights
Q: Could you share your thoughts on the near-term demand trends in India and the path for same-store sales growth?
A: Rajeev Varman, Group CEO, stated that dine-in traffic continues to improve, and the company is focusing on optimizing delivery profitability. The strategic decision to drive more people into restaurants has been successful, and the company expects this trend to continue. The delivery business has seen a 70 basis point improvement in profitability, and the full effect will be visible in the coming quarters.
Q: How should we look at capital allocation between India and Indonesia as you explore the path to raise additional growth capital?
A: Rajeev Varman explained that there will be no new restaurant builds in Indonesia for the next couple of years, focusing instead on making the business profitable. Capital allocation will be directed towards strategic marketing to drive sales, with no CapEx for new builds. The focus will be on reducing G&A overheads and optimizing existing stores.
Q: Would it be fair to say that the worst is behind for Indonesia from a demand environment perspective?
A: Rajeev Varman noted that the geopolitical environment is improving, and there is a positive trend in dine-in sales. The company will continue optimizing stores and reducing costs, with no immediate plans for new restaurant builds. The focus remains on turning the business around and achieving positive cash flow.
Q: What measures have you taken to improve delivery business profitability in India?
A: Rajeev Varman mentioned that the company has optimized the delivery menu, taken pricing actions, and negotiated better commission rates with aggregators. These efforts have led to significant gains in delivery profitability, and the company aims to achieve double-digit margins in this segment.
Q: What is the goal of the digital transformation initiatives, and how should we assess their success?
A: Rajeev Varman emphasized the importance of knowing customers better through digital initiatives, which helps in targeted marketing and improving customer loyalty. The digital transformation aims to increase average per check (APC) and sales, with 90% of orders now being digital. The initiatives are expected to enhance same-store sales growth and overall customer experience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
