What's important is that the share of the delivery channel would be a key factor for QSRs, going ahead, too, where Westlife would continue to lag Jubilant, say analysts. According to Nirmal Bang, the near-term (1-2 quarters) operating environment would be weak for QSRs with higher impact on dine-in sales; the recovery would be gradual.
The Street is also paying for the likely faster recovery of Jubilant. Its stock has recovered 41 per cent from March lows, while Westlife is up 2.5 per cent.
Though Westlife’s 50 per cent share of non-dine in channels, such as delivery and takeaways, looks comfortable, delivery channel sales, which are recovering faster, is just 25 per cent, according to analyst estimate, compared to about two-thirds for Jubilant. Westlife does not reveal the share of delivery channel.
Vishal Punmiya, analyst at Nirmal Bang, which has ‘buy’ on Westlife due to its long-term growth prospects, wrote in his note: “While Westlife has taken various initiatives to continue its non-dine-in business, it won’t be enough to compensate for the sharp decline in dine-in.” Westlife’s management also expects dine-in sales to see some impact, even as the restaurants are fully operational, because of social distancing norms, and the situation to improve in six months.
Higher dine-in share in the current environment has also impacted Westlife’s profitability and return ratios, which are lower than Jubilant's. And, the trend is unlikely to change soon. Efforts to improve profitability by expanding high-margin stores like McCafe would get delayed due to the Covid-19 crisis, say analysts.
In this backdrop, the stock is likely to remain an underperformer in the near term.