Westlife Foodworld Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Strongest quarter in recent past: Q1 delivered the highest topline growth, highest SSSG and fastest guest count growth, all led by double-digit footfall increases as more people walked into McDonald's more often.
• South region turned positive: South ended the quarter with positive SSSG of close to 4.5%, a meaningful recovery driven by the everyday value platform and sharper on-ground execution.
• Margins held flat despite 200 bps of inflation: Operating EBITDA margin was broadly stable YoY as cost governance and operating leverage absorbed unbudgeted spikes in fuel, food, packaging and labour costs.
• Store opening guidance intact despite slow Q1: Only 5 net new restaurants opened in Q1 due to a temporary fryer inventory gap, but management remains firmly on track for 60-plus additions in FY27.
• What to watch next quarter: Whether the exit velocity from May and June carries through, the pace of gross margin recovery from what management calls the inflationary peak, and any price increase decision that balances momentum with margin.

Demand & Topline Momentum

• Footfall-led growth: SSSG of 4.3% was driven largely by double-digit guest count growth, which management called a point of pride; the everyday value platform continues to recruit people into the category and drive dine-in footfalls.
• Momentum trajectory: December was the inflection point for footfall; the build carried through January to March and continued playing out well in April, May and June, reaching double-digit-plus growth.
• Ticket improvement emerging: Green shoots of ticket improvement started appearing last quarter after ticket had been "far lower" in the prior three months; the first priority was always driving customer footfall back into restaurants.
• Channel balance: On-premise and off-premise grew broadly in line at 12% and 11% YoY respectively; McDelivery continued to deliver and remains a key growth engine, though delivery as a percentage of sales was flat to marginally down by 1%, indicating broad-based growth.
• Digital engagement deepening: Digital sales contribution reached 74%, up ~150 bps YoY; cumulative app downloads crossed 5.5 crore with ~0.37 crore monthly active users; promotional drops on the McDonald's and McDelivery apps contributed to success.
• Structural, not cyclical: Management sees the improvement as structural because it stems from trials conducted last year before launching the ₹99 Value platform first in West, then systematically in South in March.

Akshay Jatia: "Q1 FY27 marks our strongest topline growth, highest same-store sales growth and fastest guest count growth in the recent past. Most importantly, every one of those numbers is being led by more people walking into McDonald's more often."

South Region Turnaround

• Positive SSSG achieved: South delivered close to 4.5% SSSG this quarter, a meaningful improvement from one year ago; double-digit guest count growth was recorded across all three months.
• Recovery drivers: Strengthened on-ground execution, local consumer relevance, the everyday value platform, brand campaign relatability, and sharper auditing of quality, service, cleanliness and value.
• Playbook advantage: Westlife entered South almost 10 years later than West, so the West playbook is already known; management is "far more confident of South turning around strongly" and reaching West's level "sooner than later."
• Store opening tilt: Store openings in South were tapered last year while solving value perception and execution issues; going forward, South will receive more store openings as confidence and unit economics improve.
• SSG outlook: Management is confident about mid-single-digit SSG in South, with growth expected to be broad-based; green shoots are appearing by doing "absolute basics" including strengthening value and ensuring top-notch restaurant execution.

Saurabh Kalra: "The advantage we have is we have seen how West played out. South, we went also almost 10 years later. So we already know what playbook we have to work on. I think we are far more confident of South turning around strongly and then reaching where West is sooner than later."

Margins & Inflation

• Inflation absorbed: Over 200 bps of inflation hit across multiple line items: food, paper, distribution, labour (minimum wages), utilities (gas price increase), diesel, and higher advertising and promotion spend; these were sudden, unbudgeted hits, with oil-related and packaging costs rising due to crude.
• Gross margin stable: Gross margin held at 67.6% despite the inflationary pressure; management believes Q1 represents the peak of the inflationary impact and it should not worsen from here.
• Operating leverage consumed: Operating leverage gains in Q1 were largely utilized to offset inflationary pressures rather than flow through to margin expansion.
• Marketing spend elevated: Marketing spend has been a little higher than expected over the last two to three quarters.
• G&A declining: G&A declined 6.5% this quarter; most of the restructuring is now complete, and G&A is expected to run in the 6% to 6.5% range going forward.
• Margin levers identified: Product mix, cost engineering, restaurant-by-restaurant focus on bottom-performing restaurants, and pricing are the levers to drive margin improvement; management declined to give specifics on cost-engineering measures when pressed.
• Price increase deferred: No price increase has been taken yet; the typical annual increase is ~3% (broadly 50% of inflation); management will take price increases "at some point in time" after consumer research, ensuring it does not disrupt momentum or margins.

Saurabh Kalra: "For us, it is at the highest possible level, and we should see improvements from here on. Even if nothing improves, then it should not go any bad further."

Everyday Value & Brand Strategy

• Value as recruitment platform: The strategy change from last year focused on value as a platform to recruit people into the category; the ₹99 Value platform launched first in West, then systematically in South in March, and has given a substantial increase in guest counts entering restaurants.
• Brand campaign resonance: The new brand campaign anthem "Let's Family at McDonald's," launched in Q1 celebrating McDonald's 30th year in India, had great impact on relatability across Gen Zs and families, resonating across regions.
• Core menu focus: Management emphasized that the business is about selling burger, fries and beverages; merchandising drops last only 2 to 3 days and activity is "far lesser than ever," with focus remaining on margin-accretive core sales.
• Funding model viability: Management pushed back on any suggestion that the everyday value platform dilutes margin, stating that funding such platforms is a core competency and that if it were unaffordable, the McDonald's business model would not be viable.

Saurabh Kalra: "If this was something we couldn't afford, then I don't think that McDonald's as a business model would be viable. So I think I want to answer it like this so that everyone understands that funding for everyday value platforms is our core competency and is not something that dilutes margin."

Store Expansion & Organizational Restructuring

• FY27 store guidance maintained: On track to deliver 60-plus new restaurants in FY27 and 580 to 630 restaurants by December 2027, despite Q1 seeing only 5 net additions; the shortfall was a timeline issue caused by a temporary fryer inventory gap when some existing stores were converted using electric fryers originally meant for new stores during the LPG crisis.
• Regional restructuring: The operating structure is being realigned from three divisions to five, building a sharper, more agile organization closer to every market; the West region is being broken into smaller sub-regions, mirroring what was already done in the South six to eight months ago.
• Cluster strategy emerging: With Gujarat, Pune/rest of Maharashtra, and Mumbai each approaching ~100 restaurants, management will treat them as clusters to respond with tactical interventions close to the consumer, optimizing disciplined P&L improvement starting from topline.
• Global recognition: Received the Global Breaking Ground Development Award from McDonald's Corporation, recognizing development excellence in network expansion.

Digital & Technology

• Digital as growth imperative: Management stated bluntly that if the company does not grow digital, it will not grow; loyalty points and personalization journeys are being anchored sharply.
• Two-app architecture: Currently two separate apps exist: one for dine-in (offers and loyalty) and one for e-commerce/McDelivery; integration is planned "at a later point in time" but both serve clear purposes now.

Saurabh Kalra: "So I think if we will not grow digital, we will really not grow."

Guidance & Commitments

Key Metrics