McDonald’s chain of outlet operator Westlife Developments took a hit in sales for the Jan-Mar quarter due to the nationwide lockdown imposed by the government to combat Coronavirus or COVID-19.
The company’s same-store sales growth (SSSG) has declined 6.9% for the the three months of Jan-Mar 2020, while sales growth has suffered a decline of 1.5% on year.
For the full year ended March 31, 2020, the SSSG increased 4.01%, while sales growth on year basis has increased 10.3%.
The company enjoys strong cash reserves, with Rs 156 crore of investments in various mutual funds and other instruments that can be converted to cash at short notice. Additionally, the company has more than Rs 225 crore of free debt lines available.
However, given the current situations that are unpredictable, daily evolving, it is determined to operate with a long-term mindset and confident of its resilience.
While the company is unable to anticipate what a post Covid-19 world will look like, but is taking definitive steps to preserve financial strength and is well-prepared for the challenges ahead.
Westlife plans to rationalise costs, curtail discretionary expenses, review capital expenditure and other Q4FY20 items.
As part of these steps, Westlife is reviewing all investments and cutting expenditures, wherever possible.
It expects the long-term rental agreements, variable rent as a percentage of sales deal etc will help the company to rationalise rental costs, wherever feasible.
Similarly, it is reviewing the entire business cost structure to rationalise cost not just for now, but for the long term as well.
The company is also managing all the costs and reducing expenses that are not critical for business continuity currently.
It is reviewing its capital expenditures, and as a result once the lockdown is lifted, it will focus on projects that were underway and were halted due to the lockdown. It will reduce its store expansion guidance for FY21.
Also, the company expects cost impacts such as write-offs, wastage, G&A, etc to be included in Q4FY20.
Overall net net we feel that Q4 numbers are not important and what the market will keenly watch is to what is management commentary on the future demand outlook and timeline expected for normalcy in operations.
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