Margin squeeze more than halves Westlife's Q1 net profit to ₹0.6 Cr as costs bite
PAT -52.2% YoY · revenue +11.86% · margins compressing · inline vs street
₹735.64 Cr
+11.86% YoY
₹0.59 Cr
-52.2% YoY
0.08%
-0.1pp YoY
₹0.04
Westlife Foodworld, the McDonald's operator for west and south India, delivered a two-speed Q1 FY27: consolidated revenue from operations rose 11.9% YoY to ₹735.6 Cr — comfortably ahead of the ~₹702 Cr (+6.7%) the street had pencilled in — but consolidated net profit fell 52% YoY to just ₹0.59 Cr, coming in below the ~₹1 Cr consensus. The top-line strength reflects the 'everyday value' guest-count push and continued network expansion; the collapse at the bottom line is a margin story, not a demand story.
Q1 FY-2027 vs prior quarters
The squeeze sits on the gross line. Cost of materials consumed jumped 27.8% YoY (₹238.7 Cr vs ₹186.7 Cr) against revenue up only 11.9%, dragging gross margin ~400 bps lower to 67.6% from 71.6% a year ago — commodity inflation biting exactly as management flagged on the Q4 call. That level does honour the ~67%+ gross-margin guidance, so the print meets the stated bar even as it compresses YoY. Below EBITDA, the cost of expansion shows up: depreciation rose 8.9% to ₹60.0 Cr and finance costs 9.4% to ₹38.8 Cr, so PBT fell to ₹0.79 Cr from ₹1.66 Cr and net profit was left razor-thin at ₹0.59 Cr on ₹735.6 Cr of sales (NPM ~0.08% vs 0.19% a year ago).
The stock went into the print at ₹485.35, down 3.5% over the past month of trading.
For context: revenue is at a 6-quarter high.
What the summary numbers don't show
No exceptional items this quarter — FY26 one-offs (₹58.2 Cr redevelopment gain, impairment, labour-code impact) do not affect the clean YoY comparison
Management guides for accelerated network expansion of 60+ restaurants annually, targeting mid-single-digit Same-Store Sales Growth driven by its 'everyday value' strategy to boost guest counts. Near-term gross margins are expected to be around 67%+, reflecting some commodity inflation but supported by cost efficiencie
— This quarter: met
The sequential picture (+12.3% revenue, −75% PAT vs Q4) is not the signal — Q1 is a seasonally different quarter and Q4's ₹2.4 Cr PAT was flattered by a ₹2.6 Cr prior-period tax write-back, so QoQ profit is not comparable. On a YoY, like-for-like basis the read is a clean growth-in-sales, shrink-in-profit quarter. The standalone statement is not the business — its ₹6.23 Cr profit is almost entirely the ₹6.29 Cr HRPL dividend that consolidation eliminates.
W1
Gross margin trajectory vs the ~67%+ guide: it held at 67.6% this quarter but is down 400 bps YoY — watch whether commodity inflation eases in Q2
W2
Same-store sales growth vs the mid-single-digit target — revenue +11.9% blends SSSG with new stores; management's SSSG disclosure on the concall is the checkpoint
W3
Whether the 60+ restaurants/year expansion keeps lifting depreciation and finance costs faster than sales, keeping net margin near breakeven
Digitally-signed clear PDF, in Rs Lakhs (÷100 to Cr). No exceptional items in the current quarter; the FY26 exceptionals (₹58.2 Cr redevelopment gain, ₹5.4 Cr impairment, ₹9.7 Cr labour-code impact) sat only in the FY26 full-year column, so the Q1FY26 comparative PAT of ₹1.23 Cr is clean and YoY needs no adjustment. Standalone P&L is dominated by a ₹6.29 Cr dividend received from wholly-owned subsidiary HRPL (eliminated on consolidation) with nil tax — consolidated is the meaningful basis.
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