Westlife Foodworld Ltd, which owns and operates McDonald’s restaurants in western and southern India, is likely trying to reheat its growth story, but the June quarter (Q1FY26) results left investors asking for more.
Consolidated revenue grew 6.7% year-on-year to ₹657 crore, aided primarily by store expansion. However, same-store sales growth was muted at 0.5%. Even on a low base, given that the same store sales fell 6.7% in Q1FY25.
The weakness in discretionary consumption continues, and the company acknowledged that performance in the southern market remains a drag. To address this, Westlife has appointed a new regional leadership team focused on improving execution in that region.
ICICI Securities points out Westlife’s trailing 12-month revenue per store declined 3% year-on-year to ₹6.22 crore. This is even as peers like Sapphire Foods cited relatively favourable trends in Tamil Nadu, said the broking firm in a report on 24 July.
Encouragingly, Westlife has retained its long-term goals. The company continues to guide for an 18–20% operating Ebitda margin by FY27, with gross margin expected to stay above 70%. However, achieving the target hinges on a steady pick-up in same store growth, closer to high single-digit growth annually, which is no small feat.
Gross margin rose 83 basis points (bps) year-on-year in Q1FY26 to 71.6%, aided by better supply chain efficiencies. Restaurant operating margin grew around 80 bps to 19.9%, but higher corporate overheads meant the operating Ebitda margin stayed flat at 13%.
On the brighter side, dine-in demand grew 8% year-on-year, signalling a return of footfall. Off-premises channels rose 4%. Management expects a gradual improvement in eating-out trends, aided by easing consumer-level inflation.
Expansions are a key lever. Westlife added nine outlets in Q1FY26 and reiterated its plan to add 136–186 stores by 2027, taking the total base to 580–630 from 444 currently.
Elara Capital noted that “after facing dual challenges of weak growth and margin compression, commentary now indicates potential growth improvement, with margin likely bottoming out.” They forecast same-store sales growth of 3.5–4.0% over FY25–28, raising revenue and earnings per share estimates slightly.
For now, however, the near-term outlook depends heavily on a turnaround in the southern region, along with sustained growth in same-store sales and average daily sales. Without that, margin expansion could remain elusive, even as the store base grows.
At an EV/Ebitda multiple of 26x on FY27 estimates, according to Bloomberg, the stock offers little cushion. A sharper recovery in operating metrics will be essential to justify the current valuation.
