Smashburger drags Jollibee income lower in Q1

By Arra B. Francia, Senior Reporter

EARNINGS of homegrown food giant Jollibee Foods Corp. (JFC) dropped by 14.7% in the first quarter of 2019, pulled down by losses of recently acquired burger chain Smashburger and weak consumer sentiment.

JFC said in a statement that net income attributable to the parent fell to P1.54 billion, against P1.8 billion in the same period a year ago, after the company consolidated Smashburger into its financial statements starting April 2018.

The listed quick-service restaurant operator acquired 85% of the Denver-based shop’s equity shares last year. Without Smashburger, JFC said operating income would have grown 9.1% for the quarter.

Meanwhile, systemwide retail sales firmed up 18.1% to P54.28 billion, resulting to a 14.1% increase in revenues to P40.35 billion.

“Our financial performance in 2019 by quarter will be mixed. Our sales and profit performance in the first and second quarters will not be as strong in previous years…Our profit is also being affected by the performance of Smashburger in the United States,” JFC Chief Financial Officer Ysmael V. Baysa said in a statement.

Net income from the Philippines, which contributes 73% of the company’s systemwide sales worldwide, grew 11.1% year on year. This came after a 9.5% increase in sales, thanks to newly opened stores that accounted for 7.8% of the growth.

Same-store sales growth (SSSG) in the country stood at 1.7%, while worldwide SSSG was at 1.9%. Mr. Baysa noted that SSSG in the first half will “not be as strong” against the comparable period last year.

“We look forward to sales and profit recovery in the third and fourth quarters as consumers in the Philippines slowly regain their purchasing power after being adversely affected by high inflation in 2018,” Mr. Baysa said.

Mr. Baysa added that he expects the company to sustain its historical sales and profit growth rates in the medium term, while transforming Smashburger into a “much stronger business.”

JFC has committed to spend P17.2 billion in capital expenditures this year, as it plans to open at least 500 new stores. Half of these will be located in the Philippines with the other half to be developed overseas. Vietnam will lead JFC’s international expansion with 120 new stores in the pipeline, followed by North America which will see the opening of 40 new stores.

It also plans to open the first Jollibee store in Spain, the first Tim Ho Wan franchise store in Shanghai, the first Tortas Frontera store in Chicago, and the first Panda Express franchise store in Manila within the year.

The company ended the first quarter with 4,543 stores carrying different brands such as Jollibee, Chowking, Greenwich, Red Ribbon, Mang Inasal, Burger King, and Pho24.