McDonald's India franchisee Westlife's profit misses as costs mount

BENGALURU/CHENNAI, July 27 (Reuters) - Westlife Foodworld (WEST.NS) reported a smaller-than-expected rise in first-quarter profit on Thursday as higher expenses took the shine off increased sales at the operator of McDonalds (MCD.N) restaurants in West and South India.

The franchisee for the U.S. fast-food chain said consolidated net profit after tax rose to 288.3 million rupees ($3.52 million) for the quarter through June from 235.8 million rupees a year earlier.

Analysts on average were expecting the profit to be 321 million rupees, according to IBES data from Refinitiv.

India is reeling under rising prices of essentials including tomatoes and cheese, prompting restaurants to introduce new strategies to protect margins and keep sales coming in from consumers looking to cut back spending.

McDonalds (MCD.N) in June launched discounted meals comprising a McChicken or McVeggie burger, medium Coke as well as fries at 179 rupees, with hefty marketing spends, Westlife Executive Director Akshay Jatia told Reuters last month.

Same-store sales for the quarter increased 7% from a year earlier, but that was not enough to make up for the 14% increase in expenses, with higher prices of packaging material and food products inflating costs.

Shares of Westlife, which rose 25% from April to June, climbed 5% as the restaurant operator declared an interim dividend of 3.45 rupees per equity share.

Total revenue from operations for the quarter also rose 14% to 6.15 billion rupees, driven by an 18% increase in on-premise sales, which includes dine-in and takeaway and the addition of four new stores.

Westlife plans to add 40-45 new stores in the year ending March 2024.

Earlier this week, rival Jubilant FoodWorks (JUBI.NS), which runs Dominos Pizza (DPZ.N) restaurants in India, posted a 74% slump in quarterly profit due to higher raw material costs and investments to open more stores.

($1 = 81.9400 Indian rupees)