Jollibee slashes capex as COVID-19 disrupts operations

Jollibee Foods Corp. (JFC) is cutting its capital expenditure (capex) allocation for the year to P5 billion due to the operational adjustments brought by the coronavirus disease 2019 (COVID-19) pandemic.

In a statement Tuesday, the global fast food operator said it is reducing its capex by 64% from the previously announced allocation of P14 billion. Operating costs are also being reduced “significantly” for its stores, commissaries, support services and main offices all over the world.

“In response to the disruption in the operations of the business brought by the COVID-19 epidemic, JFC is postponing about P9 billion worth of capital expenditures from 2020 to 2021 given the operational constraints to the construction of facilities and to the uncertain demand volume due to limited mobility of consumers,” it said.

JFC has 5,981 stores across the globe as of end-February: 3,317 in the Philippines and 2,664 abroad. Its overseas footprint covers China, Vietnam, Brunei, Hong Kong, Singapore, Macau, Malaysia, Indonesia, United States, Canada, Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain, Oman, Italy, United Kingdom and Guam.

The company previously announced operational limitations both locally and abroad due to government-imposed lockdowns in select regions in light of COVID-19.

In China, JFC temporarily closed 107 of its 342 stores during the height of the outbreak. It then relied on its delivery business for growth, which now accounts for 76% of sales of its Yonghe King brand in China from 40% before. And as the situation improved, JFC was also able to reduce its closed Yonghe King stores to 22.

In North America, operations of stores were limited to delivery and take-out services.

In Singapore, activity shifted to delivery as well, which now contributes 22% of sales from 7% before the pandemic. Total same store sales has likewise grown by about 4%.

In the Philippines, the delivery business has grown 5% in the early part of 2020 from 3% in the early part of 2019. But as several stores have closed due to the Luzon lockdown, those that remained open for drive-thru and take-out orders have risen at an average of 50% same store sales growth in the early part of the year.

“While the COVID-19 pandemic has brought unprecedented disruption to our operations in the Philippines and other parts of the world, we are already planning for the full restoration of our operations,” JFC Founder and Chairman Tony Tan Caktiong said in the statement.

“We expect growth to resume even if gradually, driven by our Delivery, Take-Out and Drive Thru business channels. We believe that our consumers will continue patronizing strongly our products and services, once constraints related to the control of the COVID-19 are lifted,” he added.

JFC controls brands such as Jollibee, Chowking, Greenwich, Red Ribbon, Mang Inasal, Burger King, PHO24, Yonghe King, Hong Zhuang Yuan, Dunkin’ Donuts, Highlands Coffee, Hard Rock Cafe, Smashburger, and Coffee Bean and Tea Leaf.

Earnings of JFC stood at P6.33 billion in 2019, 14.4% lower from a year ago due to a 25% contraction in operating income to P5.87 billion. Its shares at the stock exchange increased P4.50 or 4.25% to P110.50 each on Tuesday.