Store closures, digital pivot costs push Jollibee deeper in the red
MANILA, Philippines — Homegrown Jollibee Foods Corp. sank deeper in the red in the second quarter as the full effects of pandemic-induced lockdowns forced outlet closures and a costly shift to food deliveries and digital payments.
In a disclosure to the stock exchange, Jollibee said the company suffered P10.17 billion in net losses from April to June, nearly 10 times the P1.8 billion losses recorded the prior quarter. In the same three-month period a year ago, Jollibee profited P1.04 billion.
For the first 6 months, Jollibee was operating at a net loss of P11.96 billion.
The financial result was to be expected as the full implementation of lockdowns concentrated in the economic center of Luzon took its toll on business operations. Lockdowns elsewhere in the globe also deterred business, forcing the food giant to close down 7% of its worldwide outlets.
Shares at Jollibee are trading up 1.58% priced at P128.20 apiece as of 9:54 a.m. in the first hour of trading.
"The business results were very bad but in line with our forecasts," Ernesto Tanmantiong, chief executive, said in a statement.
With branches shuttered, sales plummeted. System-wide sales dropped 48.4% year-on-year in the April-June period. Broken down, sales in the Philippines, where one of the world's tighter lockdowns was enforced, plummeted the most by 57%, while those in China slipped 37% year-on-year.
By region, stores in Europe, Middle East and Asia (excluding Philippines) suffered the biggest sales drop of 45%. The Jollibee Group has 5,874 stores worldwide, led by its flagship Jollibee brand and including other names such as Coffee Bean and Tea Leaf, Greenwich, Red Ribbon and Smashburger in the US.
Lower sales mean lower revenues that sank 46.6% in July year-on-year, financial statements showed.
The spending side also contributed to the losses. Last June, Jollibee earmarked P7 billion to strengthen its delivery services, capitalizing on consumers staying at home during the lingering pandemic. Digital payment systems will also be boosted. Without that investment, June quarter losses only amounted to P3.2 billion.
"We are now focusing on rebuilding our business moving forward along with implementing major cost improvement under our Business Transformation program," Tanmantiong said. "We expect sales and profit to improve over the next few months."
As a result of the push for more food deliveries, Jollibee said it is shutting down 255 branches and merging their operations with those still in service. But closures will be offset with 338 new outlets that will still be opened this year, yet concentrated mainly in foreign markets like Vietnam, Malaysia, China and North America.
In addition, Coffee Bean and Smashburger, which are loss-making businesses acquired by Jollibee in 2018 and 2019, are both expected to revert to profit by 2021.
"We expect sales and profit to increase significantly in 2021 to a point closer to the levels of 2019 and to grow at least at historical growth rate of 15% annually by 2022.” Tanmantiong said.
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