Westlife Foodworld Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Volume-led recovery, margin still soft: Second consecutive quarter of positive comparable sales, with almost all growth coming from volume rather than value, while restaurant operating margin dipped 30 bps YoY on operating deleverage.
• On-premise is back in the lead: On-premise business grew 8% YoY, outpacing off-premise at 5% YoY, as the delivery channel showed marginal softness this quarter.
• New stores are pulling down AUV, by design: Comp restaurants grew, but overall average unit volume is being dragged by new stores added in the last two years, including conscious low-volume locations like expressway outlets that management frames as future-growth investments.
• Vision 2027 expansion stays on track: 47 new restaurants opened in FY25, in line with guidance, keeping the company on pace toward its 580–630 store target.
• What to watch next quarter: Whether the sequential month-on-month SSSG improvement holds through Q1 FY26, whether delivery growth re-accelerates, and how margins respond as new stores mature.

Demand & Sales Recovery

• Momentum building: Comparable sales turned positive for a second straight quarter, with month-on-month improvement visible through the last couple of months of Q4. Management plans to ensure the current growth momentum continues.
• Volume, not price: Almost all growth is coming on the back of volume, primarily because of the value offering. The business is a momentum and habit-led business, and traction has started to build over the last two quarters.
• On-premise outperforms: On-premise business grew 8% YoY, outpacing off-premise at 5% YoY. Off-premise now sits at 43% of total sales, aligning with the two-year average.
• Delivery channel softness: The business was over-indexed toward Swiggy and Zomato, and the growth trajectory has reduced in both channels. Management is working to expand channels to compensate and plans to accelerate growth in the delivery/off-premise channel.
• Informal eat-out under pressure: The informal eat-out segment (roadside vendors, dining places, Indian fast-food) has been flattish to negative in the last one to two years, which may be shifting share toward organized players.

Akshay Jatia: "I can't talk about this quarter specifically, but we did have a good outcome in terms of the last couple of months of last quarter as well. And we are quite confident that with our plans, we remain committed towards Vision 2027."

Store Economics & AUV

• Comp stores are growing: Comparable restaurants have not de-grown; they have grown. The overall AUV is being pulled down by new stores added in the last two years.
• Conscious low-volume locations: Some new stores are deliberate low-volume investments, such as the Delhi-Mumbai Expressway store between Baroda and Surat. Management frames these as investments for future growth, not a sign of weakness.
• Employee cost efficiency: Employee cost decreased sequentially in Q3 and Q4 despite opening roughly 30 stores, driven by productivity initiatives, labor optimization, and making labor more efficient per guest count served. On a percentage basis, employee cost is expected to remain similar going forward.
• Inventory normal: The increase in inventory on a per-restaurant basis is due to seasonality and some strategic buying, within normal trends, and will average out over the year.

Saurabh Kalra: "I would not look at it that way. I would look at it saying, you have to invest to grow for the future. And some of it is that arbitrage, which keeps on playing."

Margins & Costs

• Margin dip: Restaurant operating margin and EBITDA margin dipped 30 bps and 50 bps YoY respectively, driven by operating deleverage, partly offset by targeted cost efficiencies and normalization of marketing spends.
• Input costs stable: Input costs were stable during the quarter. The company uses multiple levers to handle inflation including product mix, pricing, and cost efficiency programs.
• Inflation reality: Management acknowledged that inflation is an annual reality requiring a certain amount of sales to cover, but stated that is not how they have always approached the business.

Saurabh Kalra: "Obviously, needless to say, there is always inflation every year, and there is a certain amount of sales required to cover up for that inflation. It's a reality of a business in an inflationary environment. However, that's not how we have always approached it."

Competition & Market Structure

• Competition grows the market: Management views competitive intensity as a positive that grows the market and allows players with strong brand equity and superior execution to stand out.
• Small players will consolidate: Small-size competition that creeps in is bound to consolidate due to weaker unit metrics.
• Regional strength in West: The West has been a very strong market from day one; the West customer resonates and relates to the brand easily, with good traction over the last few months. Management declined to break out SSSG trends by region numerically.
• South expansion opportunity: Management sees a lot of potential in the South where the company is under-indexed. Cities like Hyderabad, Chennai, Bangalore, as well as smaller towns, will see healthy store additions.

Akshay Jatia: "competitive intensity, in fact, grows the market and allows players like us or Westlife to stand out in terms of the offerings that we have."

Product & Format Innovation

• Korean LTO launched: A limited-time Korean range of burgers, sides and drinks was introduced at an entry-level price point of ₹69. There is no plan to make it permanent.
• Mango Burst range: Introduced Mango Burst McFlurry with OREO, Mango Burst McSwirl and Mango Burst smoothie as seasonal offerings.
• Store format maturity: 95% of restaurants feature McCafe, almost all stores are now in the Experience of the Future format, and every one in four restaurants offers drive-thru service. The 100th drive-thru opened this quarter.
• Infrastructure plays: Highways, metros, and airports are unlocking white spaces that management intends to tap into.

Guidance & Commitments

Key Metrics