Devyani International Ltd investors are losing patience and appetite as the KFC and Pizza Hut operator scrambles to find growth levers. The QSR segment has been under stress lately due to subdued demand and competition from food delivery platforms. But for Devyani, two crucial metrics—average daily sales (ADS) and same-store sales growth (SSSG)—signal a weary road to earnings revival.
For KFC, ADS declined by 5.8% year-on-year in the June quarter (Q1FY26) to ₹98,000 due to weak consumer demand and the auspicious Shravan month. KFC ADS is around 15–20% below the peaks of FY19 and FY23. The company aims to lift KFC ADS to ₹100,000 in FY26, aided by value menus and promotions, and by balancing dine-in recovery with a sharper online push.
For Pizza Hut, ADS was 8.3% lower year-on-year at ₹33,000. Both KFC and Pizza Hut saw negative SSSG in Q1FY26, though KFC showed some sequential rise. Improvement in ADS and SSSG will be key monitorables, as they are essential for restoring unit-level profitability, said Motilal Oswal Financial Services Ltd. The brokerage attributes the stock’s poor performance, down 15% over the last three years, to growth challenges.
Devyani added eight new KFC stores in India in Q1, while Pizza Hut’s network shrank by 12 outlets. Pizza Hut store expansions are being done cautiously, and the focus has shifted to stabilising the base with sharper value menus and promotions. That is a defensive strategy, but it cannot be avoided in a crowded pizza market.
To diversify, boost revenue and drive cost synergies, Devyani recently entered the high-growth potential Indian cuisine market by acquiring Sky Gate Hospitality brands, including Biryani By Kilo. While currently loss-making, the acquisition is expected to be Ebitda positive in FY27.
Other new formats of TeaLive, New York Fries and Sanook Kitchen are also slated for test launches next quarter before scale-up. Clearly, Devyani is juggling with managing various brands at different stages, so driving store productivity without losing focus on its core brands would be crucial.
Plus, margin pain continues. Consolidated Ebitda margin dropped to 15.1% in Q1FY26, down 320 basis points, as ad spend was front-loaded to stoke demand. While the management expects profitability to improve from Q3FY26 as campaigns pay off, inflation in cheese, flour and edible oils, along with GST on rentals and aggregator commissions, could keep margins tight.
“Given the softness in margins and slower growth, we are tweaking FY26E/27E revenue by -2.4%/-3.2% and EBITDA by -8.4%/-6.3%,” said the Nuvama Research report dated 13 August. In this backdrop, the stock’s muted performance is not surprising. In CY25 so far, the stock has declined 7%.
