Jubilant Foodworks Ltd
NSE:JUBLFOOD
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Jubilant Foodworks Ltd
Earnings Call Analysis
Q2-2025 Analysis
Jubilant Foodworks Ltd
In the second quarter and first half of FY '25, Jubilant FoodWorks reported consolidated revenues of INR 19.6 billion, reflecting a remarkable year-on-year increase of 42.8%. The growth was driven by robust performance in both the Indian and Turkish markets, with Domino's India achieving record orders and app traffic. The company is intensifying its strategy of building its flagship brand Domino's, highlighted by increased investment in marketing and product innovation. Key new products like the Volcano Pizza and Cheesiken have resonated well with consumers, contributing to over 20% order growth year-on-year.
The company continues to enhance customer experience through operational improvements, including a commitment to reducing delivery times from 30 minutes to just 20 minutes. This initiative has driven a significant growth in deliveries, which increased by 32.3%. The operational excellence is also reflected in the reported EBITDA margin of 20.4%, showing a slight improvement from previous quarters. With a dedicated fleet of 36,400 riders, the company is positioned well to meet growing demand in a fast-paced delivery environment.
Jubilant FoodWorks is aggressively expanding its footprint, adding 139 new stores in the last quarter, bringing the total to 3,130. This includes 51 new Domino's locations, predominantly in India, showcasing the company's ambition to strengthen its market position. Notably, they have entered 26 new cities in the first half of the year, capitalizing on previously untapped markets and segments, including university campuses and high-traffic areas.
While the Indian segment demonstrated impressive growth, the performance in Turkey has exhibited some challenges. The Turkish operations reported a like-for-like sales decline of 6% compared to a high base from the previous year. Despite this, Domino's Turkey received recognition for brand loyalty, reinforcing its market presence amid macroeconomic fluctuations.
Looking ahead, the company has signaled optimism for continued growth, with expectations of similar or improved performance in the second half of the fiscal year. Notably, management is focused on maintaining a healthy EBITDA margin of around 10%, while prioritizing top-line growth amidst an evolving market landscape. Furthermore, management noted that positive momentum in delivery orders and overall consumer preferences could enhance their market position significantly, potentially leading to further gains in share against competitors.
The earnings call highlighted the company's strategic decision to waive delivery fees, which initially may have caused short-term margin pressures but aimed to drive order volumes. The management acknowledged that profit margins, influenced by rising costs, are a focus, but they remain committed to capturing market share over prioritizing immediate profitability. The long-term strategy is to leverage these market dynamics effectively, ensuring both growth and operational efficiencies.
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Ladies and gentlemen, good day, and welcome to the Jubilant FoodWorks Limited Q2 and H1 FY '25 Conference Call. [Operator Instructions].
Please note that this conference is being recorded. I now hand the conference over to Mr. Lakshya Sharma. Thank you, and over to you, sir.
Thank you, Darwin. Good evening, everyone, and welcome to Jubilant FoodWorks Limited Q2 and H1 FY '25 Earnings Call for investors and analysts. We are joined today by senior members of the management team, including our Chairman Mr. Shyam S. Bhartia; our Co-Chairman, Mr. Hari S. Bhartia; CEO and MD, Mr. Sameer Khetarpal; our CEO of Turkey business, Mr. Aslan Saranga; our CFO, Ms. Suman Hegde. We'll commence with key thoughts from Mr. Hari Bhartia, and turn to our CEO and MD to share his perspectives. After the opening remarks from the management, the forum will be opened to question-and-answer session.
A cautionary note. Some of the statement made on today's call could be forward-looking in nature, and the actual results could vary from the statement. We will also share the replay and transfer to the call on the company's website under the Investor Relations section.
I would now like to invite Mr. Hari S. Bhartia to share his view with you. Over to you, sir. Thank you.
Thank you, Lakshya. Good evening, everyone, and thank you for joining us. We are excited to build on the momentum from quarter 1 of FY '25 as we move into quarter 2. Despite facing a challenging demand environment in food service and broader consumer space. Our commitment to convenience, innovation and delivering unmatched value to customers has positioned Jubilant FoodWorks to gain market share and drive category growth.
The results from both quarter 2 and H1 reflect the success of our strategy. Our investments in direct-to-consumer apps, cutting-edge technology and our unique commissary based sourcing model have allowed us to excel in operational excellence. Additionally, our move to a 20-minute delivery is not only enhancing customer experience, but also reinforcing our commitment to quality service. The dedicated team at JFL remains focused on delivering exceptional value to consumers and driving growth. We have maintained price stability over last 9 quarters, absorbing inflation through cost optimization and productivity initiatives.
On top of this, we have made delivery fees. We have also accelerated new product launches, including popular cheese, Volcano range and Cheesiken, each crafted to meet evolving consumer preferences and to drive order growth. The shift from dine-in to delivery continues in India and abroad.
With our own end-to-end delivery ecosystem covering fleet riders and advanced delivery management systems, we are well positioned to embrace this strength. We are doubling down on reducing delivery times from 30 minutes to 20 minutes and accelerating new store openings expanding into new cities to capture growing demand. Simultaneously, we are committed to delivering value to our dine-in customers. Through new dine-in-only menus, we are seeing order growth during lunch hours, a promising shift that Cigna's consumer preference for dining with us.
In Turkey, our business is continuing to grow with margin improvement and store expansion, all while navigating macroeconomic headwinds. Across all markets and brands, JFL Group system sales for H1 reached INR 45.1 billion. We have added 139 net new stores, bringing our network to 3,130 stores.
Overall, we are very pleased with our growth and increased profitability of JFL Group, which benefits from corporate home setup in India and largely franchise network in Turkey.
With that, I request Sameer to share his quarterly update and his perspectives.
Thank you, Mr. Bhartia. Warm welcome to all in our earnings call today. Our strategy of doubling down on Domino's is working. To recap, we increased investment in brand building stepped up pace of product innovation. For example, Volcano pizza, Cheesiken reduce span of control by adding 3 regions, increased density of stores to enable 20 minutes delivery and relentless investments in customer-facing technology. This has resulted in momentum build up from Q1 into Q2 with August as our highest months in sales. We are seeing this carry forward into Q3, driven by new customer growth and greater than 20% order growth year-on-year. Domino's India scales new record with highest orders, highest app traffic, highest conversion and highest volume metric throughput per store.
Let me now share our performance summary for the quarter and help you with growth compositions, along with updates on India and Turkey segments. Performance summary. Consolidated revenues stood at INR 19.6 billion, up 42.8% year-on-year. The growth composition is our vendor. DP Eurasia revenue contributed 33.7% to overall growth with 9.1% being the organic growth from the existing business.
EBITDA margin came in at 20.4%, up by 14 basis points year-on-year and 57 basis points quarter-on-quarter. As a group, the network stands at 3,130 stores strong with 73 net new additions in this quarter. In Domino's, we added 51 stores with 50 stores in India, 6 in Turkey and 5 in Bangladesh. In COFFY and Popoyes, we added 11 and 4 stores, respectively. Specifically coming to India segment. In India, revenue was at INR 14.7 billion, was up by 9.1% year-on-year. Domino's growth came in at 8.1%. LFL came in at 2.8%, led by delivery growth in Domino's at 11.4%. At channel level, delivery grew by 15.9% led by record order growth of 32.3%. This is highest delivery volume per store. We have 36,400 riders on our roles who engage, who deliver for Domino's.
Led by menu innovation, we also saw a sequential growth in dine-in orders. ADS for mature stores is at INR 80,200, which is the highest in last 6 quarters. Gross margin and EBITDA margins are at 76.1% and 19.4%, largely flat quarter-on-quarter. App traffic grew by 18.5% year-on-year with 12.8 million monthly active users and material improvement in app conversion with a total of 27.8 million loyal members. Domino's network is now 2,079 stores strong serving customers across 447 cities. You will notice that we have increased the pace of store expansion quarter-on-quarter. 50 versus 34 last quarter, and we have entered 26 new cities in H1.
As guided earlier, we continue to tap on white spaces with new stores and format at university campuses, highways and Air Force. In the last quarter, we introduced Volcano Pizza, Cheesiken in South India and special INR 77 menu during Independence Day in August. All 3 interventions exceeded internal plans.
In Turkey, last year's same quarter, on account of minimum wage hike mandated by the government, consumption saw for a huge surge, hence, the business is lapping a very strong base. Also, the Central Bank focus on bringing down inflation there will be a transient impact as anticipated on demand in the near term. Overall system sales came in at $7.7 billion. Within it, Domino's Turkey system sales was at $6.9 billion. Domino's Turkey like-for-like growth came in at minus 6% on a base of 52.6 LFL in the last year of quarter 2, which is Q2 FY '24. I'm pleased to share that Domino's was awarded the recognition of being Turkey's lovemark for the second consecutive year and third time overall. For context, Lovemarks award is a survey conducted by Ipsos to find out brand consumers are absolutely in love within the category. We are humbled with this recognition, which reflects deeply the brand love and support that we receive from our customers.
The coffee brand COFFY system sales came in at INR 651 million. Coffee like-for-like growth was at minus 3.9% on a base of 35.3 LFL last year of Q2, FY 2024. All new stores opened in the quarter were franchisee owned and the franchisee mix now for COFFY stands at 78.4%. The revenue from DPU came in at INR 4.6 billion flat quarter-on-quarter. Margin expanded with EBITDA at 26.1%, plus 110 basis points quarter-on-quarter. And PAT margins are also strong and accretive to Indian business at 10.5%, plus 130 basis points quarter-on-quarter.
In closing, as we are into almost 6 weeks past big days of Diwali. Domino's India, we continue to carry forward the growth momentum and which is accelerated on network we have crossed 2,100 stores milestone. However, we are minutely focused on operations excellence, making big days bigger given Q3 is a lot about big days and festivals, increasing our investments in marketing, launching new products and making our technology assets and app work harder, while continuing to partner with aggregators.
Thank you so much. With that, I request the moderator to initiate the Q&A session.
[Operator Instructions] We have the first question from the line of Nihal Mahesh Jham from Ambit Capital.
Sir, my first question was on the dine-in side, if you look at the growth it's still negative similar to what we did in Q1. Just wanted to get your thoughts that the INR 99 menu launch has that not [ be in an ] activation in some traffic and maybe you would have expected a sequential improvement there on back of that intervention?
Yes. The -- what is -- let's step back in view of how is INR 99 dining menu halting. So firstly, it is an investment to draw customers into the stores during lunch hours, i.e., 11 a.m. to 3 p.m. When I look at that window, the -- it has obviously increased our orders. For sure, in the last quarter, it also increased the sales in that period. So it was a specific intervention when our store sales are low. Our fixed cost, manpower, electricity, everything is running. So it is -- we believe it is the right thing.
Having said that, see, the movement towards delivery is far higher in the market in terms of consumers. And therefore, that continues to grow faster. But what we are focused on is driving growth during lunch hours, that piece is working at INR 99. So we are seeing order growth in our stores during 11 a.m. to 3 p.m.
Understood. But maybe the time post 3 p.m. is where the drop is higher, I mean, it's in a way, not compensating for the increase in traffic in 11 a.m. to 3 p.m.?
See the dining is available -- see, we want to successfully focus on 11 a.m. to 3 p.m. and also bit of post that. But post that, we anyway in our business, we start seeing traffic increase in 3 p.m. So that's not an intervention we have at the moment. But right now, we are focused on 11 a.m. to 3 p.m., and we are doing more initiatives to increase that.
Got that. Second question is in terms of the store addition this quarter, we see a lot of new format stores investor [indiscernible] university campuses. Is it fair to believe that in the future, the ADS profile of the incremental set of stores would we say, similar, lower or higher just that these are some new formats that are coming as we are seeing?
Yes. In fact, our throughput for new stores have also increased, and we keep a track on it. I think what I have gone on record in saying that the opportunity to expand in India is very large. So for example, there are 1,000 campuses with more than 5,000 students. There are about 48 airport terminals that matter where we are present. For the first time, we opened 3 airport terminals. So these stores are all in terms of ADS, either similar or accretive. So there is -- we are not going to pockets with dilutive ADS. So we are very focused on getting the right ROI and payback periods, and we are seeing that. So no reason to believe these are dilutive. In fact, some of these stores in campuses, we become the captives or the only place to go to for dine-in for students. So very happy with the progress. It is not dilutive at all.
Got it. Quickly one clarification, you said that the India growth momentum had accelerated in Q3 for the first 50 days if you have -- 40 days, I'm sorry.
That's correct. So I think we are seeing the momentum carry through from Q1 to Q2 to Q3, led by delivery. That is correct.
We have the next question from the line of Jay Doshi from Kotak.
I have a question on your order growth. Clearly, in the last 6 months since you waived off delivery, it has picked up very strongly, and it's spiking at 2x your revenue growth. especially for the delivery channel. So when you look at the numbers internally, are these new orders and new business? Or are these numbers also influenced by some shift from takeaway to delivery?
And second question is that the delivery fee delivery waiver, how does -- how has it shaped up for you versus your own expectations on SSSG front, on order growth front and on profitability front? That's it from my side.
Yes. Jay, firstly great question, both of them. Of course, let me say that when you do free delivery, the incentive to take to go to a store, takeaway goes away. And with our focus on 20-minute delivery, the incentive is even lesser. So we do see a decline in takeaway. So in fact, the -- if you were to take on-premise sale in some ways, right, like this is our dine-in plus takeaway with our new store design, dine-in is actually growing. It's the takeaway business, which is moving to delivery. So you are right, a lot of -- there is a share shift. But overall delivery is growing far, far bigger than or greater than the loss in takeaway.
Now how does it pan out? I think we are very positively surprised on 2 dimensions. The amount of order growth that we are seeing in our -- like I told you 2 quarters ago that we had experimented in few stores for almost 6 months before we came to this conclusion. So when I look at that experiment, the order growth is much higher than we anticipated. Also, the new customer growth is much higher than we anticipated. And both these counts are actually very positive stories for us because new customers we know ultimately repeat at almost 3. So the compounding will happen or we are beginning to see in few areas.
Our network is poised to deliver to customers in 20 minutes and therefore, this doubling down on order growth only increases productivity inside the store, our rider productivity and customers get a better experience. So as it allows us to expand more number of stores. So very positive on this account. Yes, are we paying in term form of margins, yes, you can see we are paying in form of margins. But to me, it is a matter of time as growth picks momentum picks up, we will get that margin.
Also, we know the 2 that I will give credit to the team that we almost had -- this would have dragged almost 150 to 170 basis points, but you don't see that drag on the P&L because we have worked on internal efficiencies to recover almost 2/3 of it. So I would say very positive on new customer order growth and the -- on margin dilution, we are through internal efficiencies, we've been able to shave off. Almost 2/3 of the margin dilution.
That is very helpful. Just 1 more question, please. 1Q to 2Q, the trend -- SSSG trend was broadly similar. Are you expecting some uptick going into 3Q, 4Q? What's the outlook based on the last 40 days of the current quarter.
Yes. See again, we always refrain from giving the guidance, but given that we have 5 weeks have passed and the big base of Diwali are behind us, we are seeing actually momentum accelerate from Q2 to Q3.
The next question is from the line of Tejash Shah from Avendus Park Institutional Equities.
Sir, first question is on most operational parameters or even in our commentary. We've seen the relatively positive versus the larger basket of consumption, not even only QSR that we would have heard this quarter. So would you say this optimism is primarily driven by the positive response that we're seeing through our interventions or read on the demand sentiment itself is different from what the broader street has?
Yes. Tejash, thanks for asking that question. I think it is -- I'm no economist to correlate to that. I will definitely firstly give credit to my team, who have worked on 5 different elements to bring it together. #1 is our investment in technology. So like I said in my last few earning calls that we have doubled down on the -- our app, microservices-based architecture, removing defects right. So that was 1 piece on our app.
Second was we moved from 4 regions to 7 regions. Therefore, we have tighter control over stores. The service quality has improved. #3 we have -- 3 quarters ago, we launched a new campaign. It happens only with Pizza. So we have increased our investments in marketing. We do sharp data analysis, we learned that delivery is a big barrier. Our delivery fees is a big barrier. And therefore, we very carefully waived of delivery fees, but recovered partially in packaging charges. So that gave a set of new customers.
And lastly, I would say that the sheer execution on big days and getting these riders onboarded through technology and share will of the team. I think this is what is playing out.
And then yes, of course, someone is correcting me that we have increased the pace of product innovation as seen in Cheesiken in South India and Volcano Pizza. So all of this is coming together. When I hear the commentary of QSR players or broader FMCG space, I think my guess is as good as yours. There is -- the sentiment is obviously quite different. So therefore, I'm calibrated, but we are seeing positive momentum continue in Q3.
Perfect. Very encouraging. Sir, second question, the way all these food delivery companies have built up capacity and capability, both led by the e-commerce exposure in terms of faster delivery. And then we are seeing 1 of the quick commerce players is now kind of cross-pollinating that and 1 of the food delivery offering also as a 10-minute ready snack kind of delivery. How do you perceive this threat? And the 20-minute promise that we had started as a very discretionary fact? Do you think that it will become necessity to be competitive in the market?
I think it's -- the customers love speed, and they love free speed, right? So I'm always a very big believer of that. And so for, we have the network to post the limits of speed, right, on a very large menu. Our philosophy on technology has been that we have to ride on all sorts of technology, whether it's aggregators, ODC, our own apps, we are present. So any technological asset or a wave that we are in, we will, as Jubilant, we are fully prepared to go to participate in it. I generally believe if somebody can actually deliver faster speed with that 2,200 store network in about 500-odd cities, it is Domino's. So I worry less about it. I love that challenge Tejash. And we will -- we are evaluating it. There is no reason why we will not participate in it.
And sir, last one, if I may. In a store addition, Dunkin' seems to be subdued versus rest of our portfolios, any inside to that?
Yes, I think, we again, the -- firstly, there is tremendous opportunity in Domino's, and we doubled down, triple down as however you may want to put it. Then I've said, Popoyes is 1 area where we will accelerate and we are opening stores very encouraged by the results, all our stores open at a new high, and that we are very satisfied with that. For Hong and Dunkin, I want to drive store economics and profitability, right? And once that model is proven, we will definitely expand. So there is no reason why we will not do it. But at the moment, the teams are focused on getting the margins, ADS is right and again, no cost for alarm over they're all on track, but no expansion story there either.
The next question comes from the line of Shirish Pardeshi from Centrum Broking.
Just 1 observation. Over the last 1 year, we have entered into 50 new cities. And I'm just trying to look at the slide, which says that delivery channel revenue has grown up almost 15%. So I have this question specifically these 50 new cities. Are we now getting into less than 1 lakh population. That's the growth area we have found out? And maybe, if you can give how this new cities the SSGs or LFL can happen over the next 2 to 3 quarters?
Yes. So for 3, Shirishji, the -- I think these new cities are still very large cities, and sometimes when we look at it internally, we actually laugh. For example, we were not there in Ayodhya, right now you would say you have to be and I think we can open 4 or 5 stores in popoyes to be very honest, right? One of the smart cities in Gujarat is called Dahod right? And we were not there. So it's 1 of the 20 smart cities in India.
Similarly, we were not there in Vrindavan. So now these are all very high traffic, high footfall cities, which are becoming bigger and expanding right? So -- and I believe we can actually add more stores into these are still very -- more than 1 lakh population at the moment. And so what they do is we obviously not only get favorable rentals they have higher dine-in proportions and we are the go-to destination, when it comes to international cuisine experience. On LFL, et cetera, we are seeing -- continue to see similar LFLs in fact, slightly higher because we had some differentiated pricing in these cities. So no -- we are very, very happy with it. We will continue to expand into new cities.
Okay. The reason, Sameer, I was asking, the addition of 50 new cities and if I look at the via-a-via addition of stores is 191. So I was more curious that 50 new cities would have started with maybe 1 or 2 stores. That's the way we should look at? Or more number store because you just alluded saying Ayodhya you have opened 4 stores?
No, no, what I'm saying is -- sorry, I mean, maybe it was not -- so a new city is defined for us where we have 0 stores. So whenever we open 1 store, that becomes an existing city. So Ayodhya is a new city because we didn't have a store over there. So now if we open the second store, we will not count it as an existing city.
Okay. My second question on the DP Eurasia, I think the system sales has been a little muted and even LFL. So how one -- we should look at the second half for the year? And maybe some more color because now almost 89% of our stores are franchise led. So maybe in terms of revenue projection and the margin performance for next half.
Yes. I think again, we refrain from giving guidance, but let me give you some color. So firstly, the -- it continues to be a PAT accretive business at 10%. And as you see, the teams despite fiscal tightening by the government continue to expand margins. Coffee margins have also improved materially, and we are expanding stores also. So now the quarter-on-quarter growth seems muted largely on because of higher base.
I expect this to kind of change in a couple of quarters. So there is no cause of alarm or anything teams are meeting a large part of it, Shirish was in their internal plans and budget because we could see Q3 of -- sorry, Q2 of last quarter, last year, was a very high base for them. In fact, the average weekly throughput per score was very high and which was not the norm. So again, happy with the performance. In terms of color, I would only say that the like-for-like should only improve from here, and the team is on track to open their new store and the EBITDA margin should remain broadly in line and in fact, around 10%.
The next question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on growth condition in first few weeks of Q3. Sir, I wanted to check the delivery channel order count growth is at 30%, right? So I wanted to check your view on whether we are gaining share versus other participants in the online marketplace. So if you could comment on that, please.
Yes, I think the -- if you look at the even the value growth, volume growth or SSG, right, of all the listed players, right, and even the store growth. So definitely, we are gaining share, and [indiscernible] -- all indicators are that and also confirmed by our own internal research.
Sir, that there was a period where a good amount of smaller franchisee-led bank sort of picked up and they expanded significantly by a franchisee. So this extended period of consolidation or market share gains, do you think that this can lead to some amount of consolidation in the online marketplace segment?
Hard to say. I think, this is hard for me to comment, but at least the -- my own learning [indiscernible] starting INR 135.9 crores for H1 FY '25 compared to INR 68 crores for the same period last year, representing a 100% increase with the profitability growing strong, our EPS also improved substantially. So our basic EPS for H1 FY '25 came in at INR 11.03 per share, reflecting a 76% increase from INR 6.27 per share last year.
Again I would request you to put others on mute, there is slight disturbance somewhere. Giving your business updates and strategic initiatives that we have taken, okay? In addition to our strong financial performance. I'd like to highlight a few of the key strategic moves we have made this year. Number one, expansion of independent power production, so what we call it an IPP, our segment where we invest our own capital and we set up the plant and we sell power to third party, in the utility scale or in the third-party C&I customers. So our installed IPP capacity as of FY '25.
I'll request everyone to please go on mute. Thank you. Thank you.
And we have orders in hand of -- for IPP of around 1.26 gigawatts, which is the biggest order book till date in the KPIs book.
Moving on to the second business segment, that is our capital power producer, where we set up the plants for others, and we sell the plant to them and we also do the O&M of that plan. So our CPC business continues to show strong momentum with 336 megawatts installed capacity as of half year FY '25. And we have orders for an 1.148 megawatts. So both the segments have a strong order book and a strong execution capabilities also are there. So we expect this coming year also to be a strong performance as we saw this half year.
Moving on to technological advancement. We have adopted cutting-edge technologies like single access solar tracker bifacial solar panel and AI-driven robotic cleaner.
[Technical Difficulty]
Ladies and gentlemen, we apologize for the disconnection. We have now connected with the management. Over to you, sir.
Devanshu I think was asking the question. Devanshu, if you can repeat, we can answer to that.
Sir, Devanshu seems to have dropped from the queue. Should we go ahead and proceed with the next question?
Yes, please.
We have the next question from the line of Aditya Soman from CLSA.
Sir, just 1 question for me. I think in terms of ADS, when I compare the ADS of, let's say, 1Q 24 that you reported today versus the 1Q '24 that was reported earlier, there's a big gap, I mean, almost a 5% gap similar for preceding quarters. So why is this happening? Why is the ADS for older stores reported today lower than what was reported earlier?
Sorry, Aditya, which chart are you referring to? We have shared the Domino's mature store ADS.
Sorry.
Yes, go ahead.
Yes. So the mature store ADS for, let's say, 1Q FY '24, as reported in today's presentation is INR 77,000, whereas it was almost INR 81,000 in the 1Q FY '24 presentation.
Yes. So basically, what we do Aditya is that we report on mature store ADS. So whatever is the store we split, we actually removed that from the base, and therefore, we present a full cities to you every quarter. You will get the new cities. So it is computed on 1,621 stores. There is a difference of 15 stores, and therefore, the base also gets corrected. This is a recurring metric, which we have been reporting for almost 8 quarters now.
Yes. No, no, I understand that. I'm just trying to understand why is it consistently lower the base maybe, and should the impact of 15 stores equate to almost 5% difference in the mature store radius? I mean, I was just trying to understand how that economics was working?
Yes. So Aditya, it will not be a like-for-like comparison. So effectively, what we would be doing at 1,621 stores is giving you a continuum of 6 quarter performance. So we can't be 100% sure that what will be that number with a higher base of, let's say, 1,640 stores.
So I think it may be worthwhile spending some time with the IR team on how that is calculated, so you can understand. So I think what Lakshya is saying is any store that is split is removed from the base of the previous quarter and this quarter. So I think that this is what is [indiscernible].
I'll connect with you, Aditya.
Fair enough.
Happy to share that calculation.
I think, intuitively, I sort of get it because I mean I'm assuming the stores that get split are the ones with the highest ADS, given that it would...
The next question is from the line of Kshitij Bansal from WhiteOak Capital. As there's no response from the current participant, we will move to the next question, which will be from the line of Ankit Kedia from PhillipCapital.
Just 1 question. We are seeing a structural shift towards delivery from dine-in or take away. Do you think it's time to experiment with your dark stores with only delivery channels? And would the unit economics of these stores be significantly better?
Yes, I think that's a constant debate that we have and it's not that we have not done it. So I think the -- we have actually, like say, 3 kind of formats. So there are mall stores, which are in food court stores, very easy to understand. Second, our full high street store, which is about 1,200 in metros and about 1,500 in Tier 3, Tier 4 cities, when we are entering into the city, so which have larger dine-in over there.
Then what we have as a delivery and carryout source. So the best ROI payback period in store where there is not -- only this delivery, there is also customers can walk in and carry out. So these are 700, 800 square feet store, and our kitchen size is about 400. So what we do is we add maybe 8 or 10 covers for somebody to sit and eat. Those are even more positive from an ROI standpoint. So I think the brand power is so strong strategies that it doesn't make sense for us to have dark stores.
In fact, we experimented with a few dark stores and in fact customer found that and came workup the stairs and said, why can't I carry an order from there? So we do get like some incremental sales from carryout. Always good to have that in the mix.
The next question comes from the line of Latika Chopra from JPMorgan.
Two questions. The first 1 was if you could talk a little about the cost trends for the business. In terms of raw material, it seems gross margins have been fairly stable sequentially. And also on rentals and employee expenses. If you could give us some sense on any potential levers for margin improvement from the 19%, 19.5% level that where we're having for the past 2 quarters, other than, of course, the LFL improvement?
And the second question was on Popoyee. You mentioned you look actively in the big stream of business there. If you could share any updated thoughts on pace of store additions. Any infinitive data points on how it should put per store or capacity per store metric...
Sorry to interrupt ma'am, but the last part of yours wasn't very clear.
Moderator, I was able to get the 2 questions. So Latika, on the first 1 from I think the raw material prices and inflation aided by Project Vijay, as have been called out I think we've actually seen some deflation, both based on commodity prices being stable or marginally declining and equally also the efforts that we have taken.
Wage inflation is there. Inflation in vegetables is there. It's very erratic, especially during trains, the likes of capsicum, tomato. And today, onion, right all these, I would say, are elevated. The rentals, I would say that with 7 regions, the teams are better positioned to scout for rentals and properties, which are lower than the average for that region. So I feel good about how the teams are executing over there. But definitely, wage inflation is high what we've done over there, we have increased our store productivity inside by almost 30%, 35% in the last 4 quarters.
So there's a concerted effort that went into through technology, also partially aided by the increased throughput for store. So net-net, I think we -- what you see, the dilution in margins at an EBITDA level is largely on account of mix change to delivery, and we waving off almost INR 40 per order. I think that's the only thing rest everything we've been able to kind of manage through internal efficiencies. So that's the color on this, but I do expect raw material prices to kind of go up in Q4, Q1 time frame.
That is my -- so again, we have to gear up for more tightening of the belt over there, so we do find efficiencies. Popoyes, I think given that we are still different and early, we are looking at trends all over the world, Latika. How is Popoyes doing in Turkey to U.S. to all the other countries that they are opening. Popoyes in India stands for bold flavors and therefore, a lot of launches around wings, hot and messy range, and we continue to double down. We've also increased our pace of expansion in malls.
And in High Street, as we see the throughput for some of the competition has very rapidly moves towards delivery. We are also reducing the store size as we -- so that we -- their stores are more geared towards delivery. Very happy to note improvements on 3 dimensions: #1 being gross margin improvement at about 50-odd stores, we are actually very close to competition over there on gross margins.
Second is our store CapEx has come down because we have localized a lot. We have fine-tuned the equipment. We have reduced the kitchen sizes and civil work. So that work has happened. And #3 is our own delivery, right? So a large part of Domino's strength is their own rider fleet and delivery capabilities. We've been able to replicate that in that. And in fact, within the Popoyes world, we don't even measure 30-minute delivery. We only measure 20 minute delivery.
All right. Just 1 follow-up on your comments on the cost structure, and you have mentioned that you expect addition probably in Q4 and Q1. At a broader consumer industry level, you have started to see pockets of inflation companies trying to pass on some bit of pricing. Just trying to get a comfort or under -- better understanding that if there is inflation hardens, other than your cost-saving measures, would you be open to consider pricing as a tool, considering now, I think 4 to 6 quarters, you have not seen any pricing, right? So any initial thoughts there?
Yes, I think -- so we have not taken a price hike, since 9 quarters. We have established a very sophisticated pricing center of excellence to look at pricing in various pockets. A lot of this learning actually comes from Turkey, which because of a high inflation environment has to do it on [ Fortnite ] basis. So we are very seamlessly copying from what Turkey is doing and building that capability over here. And there is no reason Latika, that if inflation is high and we see pockets where we can with increased throughput per store, wherever we have to take, we will take at the right time. But I think the message that you should take is we will be relentless on growth.
The next question is from the line of Akshen from Fidelity.
Congratulations on relative [indiscernible] SSSG in this environment. My question was pertaining to margins. Now as you've indicated SSSG sort of inching up a bit for you in second half, how should we be thinking about margins? Maybe we can stick to PAT margins given that there is confusion around where rent gets classified. So you are at 3.5% PAT margins today on standalone close to 3.7% on consolidated, your peak margins have been 7%, 8%?
Do we see margins go back over their second half, how about -- like some handle of up to it's into our margins? Because right now, frankly, it feels like orders are growing because you've got delivery charges and some margins have come up because of that. So let's see better order growth and revenue, it's not translating into better [ passengers ]. So just some better understanding over there would be really helpful.
I can talk and then Suman can share her understanding. I think we -- of course, we want margins to increase, right? It's not that we don't want margins to increase. So when you look at PAT, there are 2 elements that have gone into PAT. One is we had debt on our books. So there is an interest element. And second is also we said that we were in a high CapEx cycle, so there is additional depreciation that comes in over there.
Pre EBITDA, IndAS, we do want that -- so pre-IndAS EBITDA, we do want that to go up right? And -- but like I said, I don't want to lose the growth momentum at this stage. If we can gain market share definitely. And LFL at some point, will get into margin. So there is no reason why, it's not we're seeing that in buckets also.
And just to add to what Sameer said, right? I mean I think Q4 FY '24, we kind of came out with now number out of pre-IndAS now, it's about 10.9% in terms of EBITDA. And since that call we also said at that time, yes, with the delivery charges being taken off all the investments that have gone like, Sameer said on commissaries, on our front-end tech on setting up a new system and the investment we did pre cycle of momentum of growth coming back are now baked in -- from there, if you see quarter-on-quarter, the last 2 quarters, there has been improvement, albeit minute, but still we see modest expansion while we continue to keep our pricing under check, I think in this environment, and we said in the last quarter as well, it is a growth market, there's growth out there to capture.
Consumers are looking for value propositions. And if we get that franchise going. In time, the margin will follow. But I think our focus right now is growth. And of course, the absolute profit that this business just generate in a market like India and where it is already muted demand. So in the short term, if you ask us a point [indiscernible], I think it's not about margin being on focus. Of course, we'd like to maintain and maybe modestly keep improving it through internal productivity initiatives that we take, but the focus is on doubling down on growth and getting whatever demand is out there we will take.
I appreciate the answer, if I may allow just 1 follow-up. I get that prioritization of top line and growth is the right strategy at any stage in the cycle, especially now. I think where the disconnect is that when Street looks at your numbers, people are thinking about a recent recovery to 15%, 16% margin second half next year as it was and from what you seem to be suggesting is that we'll be a little more gradual. I just wanted to be sure that the expectations are set right at that level of margins, so it will come at a significantly higher ADS level. Is that understanding, sir?
Yes, it will be gradual recovery on March, it will continue to invest behind the brands, yes.
The next question is from the line of Sheela Rathi from Morgan Stanley.
My first question was with respect to the new store format, which we are opening. On an average, what would be the size of stores? Or what could be the range of store sizes with respect to your opening?
Yes. Hi, Sheela I think we -- again, firstly, these are -- now this is new, right? It's not that we have gone into a university first time, right? We -- I think, 5 or 6 quarters ago, we had shared a picture from IIT Mumbai, right? And so that model once we experimented now we have the confidence, these are container stores, right? It's still like a container, we can have 1 container store, 2 container or 3 container store depending upon the demand.
So each container is about 600, 700 above that in that range, right? So airports is largely a food court kind of a model, so whatever space you get 450 to 600 square feet that is the space, university campuses, some university campuses, where we can actually build a full restaurant, whatever is available. I think the way to look at this Latika is that, if you give us -- Sheela, to look at that is, you give us 400 square feet, we will be able to build a store.
Okay. But and what would be the proportion of these 600 to 1,100 square feet stores now? I mean, is it [indiscernible].
We don't track that, Sheela, that is not a metric that we track. In fact, we look at how many white spaces we have what is the house count and the student count and the food force. So that is what we are more focused on. The economics are very positive on all of the formats. So that -- so we keep a threshold of payback period. And then we try to fit in whatever space is available at the right rentals.
So would it be fair to say, Sameer, that over a period of time, the ADS numbers may look on the lower side, even though what we are trying to do is optimize in terms of store expansion?
I would -- yes, I mean there's 1 way to look at it if the management doesn't do any intervention, right? So if we do interventions for lunch, for example, that's quite accretive. If we start selling chicken, right, and chicken as a percentage of sales for Domino's worldwide is quite material, right?
And if you bring those, it will be incremental. The -- in fact, we had a very low share in the late night, right, and post 11 p.m. sales. So now our stores are open from 11:00 p.m. to 3:00 a.m. So that is all incremental. So the -- I would like to challenge myself and my team, so can we push the ADS up by having the right set of launches, right occasions. And of course, making big days bigger, right? I mean, if you continue to do that, then the store ADS is only going to go up.
Understood. My second question was we have done a lot of interventions and I concur with what Suman had to say with respect to the value offering. Are there thoughts around more intervention going into 3Q because obviously, the delivery LFL growth has been strong for us. But do we need to do more interventions at the right price point? Anything on the beverage side to ensure that we can see the growth coming back in a big way?
Absolutely. I think -- Sheela, thanks for putting words in our mouth. I think everything is an opportunity beverage why beverage, why stop at beverage, desserts is such a big opportunity. Then why stop at desserts, chicken, rice, snacking, lunch and many more, right, these are under works, which are huge, huge opportunity. I think what you've learnt is consumer at this stage are seeking enormous amount of value -- and for a given threshold experience, if the value is there, then you will start becoming first among equals. And that is what we are beginning to see in our data.
And my last question and just trying to verify. Sameer, you sounded more positive on 3Q with respect to the demand trends? Or is this something to do with the base effect?
I think, I generally feel -- see I look at store ADS and store volume, right? That's the metric what I look at, right? So -- and where I stand is where I sit, right? So I look at quarter-on-quarter. So from that perspective, I'm more bullish on the internal performance and base to me doesn't matter, right? I mean, are we improving quarter-on-quarter, that is what I am most interested and then the answer to that business.
Ladies and gentlemen, we will now take the last question, which will be from the line of Vishal Gutka from HDFC Securities.
My question is specifically on new launches. I think really -- you have really pushed the pedal still on new launches or interesting launches that have come out. Just wanted to -- I have 1 main question and sub-questions. So all the response overall on for new launches and the trajectory going forward, given that you've followed our white spaces.
2 specific questions, 1 is on Domino Cheese Volcano. So what we had dinner promotes kicks that, although the expedient is excellent while dining in. But in case when you deliver at home, there is some challenge that is there. How do you plan to address that? Because the -- otherwise the product is very -- is an excellent product.
And second question on cheese burst. Recently, the for your euro product, you have brought in some new launches, 3 new flavors you have brought in. I just wanted to get a sense how is consumer acceptance to those products?
Well, thanks for the feedback, Vishal, if you do encounter any feedback in delivery experience and [indiscernible] let us now. Of course, this product is best experience price out of the oven, but I will give credit to the teams to practice this delivery -- the delivery for 3 months, right? We had to change a lot of our bikes, train our workforce. Of course, there can be slippages. I'm not saying there are none.
So I think from our -- we look at the satisfaction. In fact, this is a product that has been launched in at least 10 countries. And the customer experience or rate customer satisfaction scores are actually highest in India, and it has continued. We thought this will be a limited time offer, but we are very surprised by the sales and the love that GenZs have for this product, why it is the most Instagram product in our portfolio.
And therefore, it has continued well beyond what we thought was the right life for it. So we are -- we have grandfathered it is on our menu. So therefore, it has exceeded our expectations. I think the consumer insight from the marketing team was that when customers think about Domino's, they think about craving, they think about cheese and that -- and the volcano launch prove that. And therefore, we took that to during Diwali and the festive period to most loved Cheese portfolio called cheeseburst and with Korean, muknee and fiery Cheeseburst pizzas translated also to garlic bread. So we have dramatically increased the pace of innovation, giving more crave-worthy products and Instagram-worthy product to GenZs, I think very happy to note. And that's why you see the confidence in our tone when we look at as Q3 to-date performance.
Sir, and any more, always all you're working on new launches, but I think a lot of ground has been covered in what we call last 6 months. Any meaningful launch shall we expect on the core pizza or now for timing, it is -- I think they're done with it?
No, I think, of course, we want to accelerate. So these are all core pizza, by the way, this is not pizza mania. These are all core pizzas. Cheeseburst is type of -- was type of a crust. We actually through again, through marketing insights the team realizes that this is under-indexed, it's a hidden jewel as we call it, inside therefore, we brought it up. So it's again a core pizza. This is all high-quality cheese products that we are giving. And same way, there is more inverts, you will be surprised by the pace of the innovation.
And then 1 last keeping question, but Cheesiken I believe it was launched in Tamil Nadu and Kerala, which is the other state because you mentioned 3 states. I just wanted to check the other states where you were launched?
So Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Kerala.
My bad. I think the team is correcting me. It was launched in East also in the last week.
Ladies and gentlemen, this brings us to the end of the question-and-answer session. On behalf of Jubilant FoodWorks Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.