Jollibee Foods suffers P10.2B net loss in Q2 due to COVID-19

Homegrown fast-food giant Jollibee Foods Corp. (JFC) suffered financial  bleeding in the second quarter of 2020 as the quick service restaurant chain felt the full blow of the strict lockdown to arrest the spread of COVID-19.

In a disclosure to the Philippine Stock Exchange, JFC reported a net loss of P10.171 billion, a reversal from P1.040 billion net income in the same period last year.

For the first six months of the year, the company incurred a net loss of P11.963 billion from a net income of P2.502 billion year-on-year.

JFC said its system-wide sales, a measure of all sales to consumers both from company-owned and franchised stores, decreased by 48.4% to P30.7 billion in the second quarter of the year compared to the same quarter last year “as the business felt the full impact of government restrictions intended to contain the COVID-19 pandemic.”

At the beginning of the second quarter, 50% of JFC Group’s stores worldwide were temporarily closed. 

By the end of the quarter, 88% of all stores were already open. 

However, most of the stores that were open relied heavily on delivery and take-out businesses while practically all dine-in operations were either still closed or had low level of sales volume, according to JFC.

Revenues declined by 46.6% to P23.3 billion for the quarter from P43.68 billion versus year ago.

“The business results were very bad but in line with our forecasts. We are now focusing on rebuilding our business moving forward along with implementing major cost improvement under our Business Transformation program,” JFC chief executive officer Ernesto Tanmantiong said.

“We expect sales and profit to improve over the next few months. Our business building effort includes introducing exciting new products, launching new marketing campaigns, opening cloud kitchens, introducing improvement in our delivery systems and opening new stores at selected locations particularly in North America, Vietnam, Malaysia and China,” Tanmantiong said.

JFC is planning to open a total of 338 stores worldwide in 2020. 

“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 a historical growth rate of 15% annually by 2022,” Tanmantiong said.

JFC noted that the net loss for the second quarter of 2020 of P10.2 billion included the cost for the company’s business transformation initiative of P7.0 billion. 

Excluding this cost for business transformation, the net loss would have been P3.2 billion. 

“The P7.0 billion spending for Business Transformation which we disclosed on May 22, 2020 recognizes that our industry and the consumer behavior have changed due to the COVID-19 pandemic. We are changing our cost structure predicting that revenues per store around the world in the medium term will be lower compared with pre-COVID levels,” JFC chief financial officer Ysmael Baysa said.

“The spending for Business Transformation includes closure of 255 company-owned stores, change in ownership of 95 stores from company to franchisees, payment of pre-termination penalties of stores in the US and China, closure of supply chain facilities and reduction in the size of the organization at various countries where we do business,” Baysa said.

He said that total store closures for 2020 including those outside the business transformation program such as those owned by franchisees is 416.

“The cost improvement resulting from the Business Transformation will be recurring annually with a cash payback of about 2 years, with full annual impact starting to take effect in 2021. Of the Php7.0 billion spending, Php4.8 billion will be in the form of cash. Parts of this Business Transformation are programs which will turn Smashburger and The Coffee Bean & Tea Leaf to profitable businesses by 2021,” Baysa said.

The company is estimating that financial performance will get progressively better in the next two quarters of the year as stores will have been being reopened and sales will have been gradually building up. 

JFC operates the largest food service network in the Philippines. As of June 30, 2020, it was operating 3,286 restaurant outlets in the country.

The JFC Group’s worldwide store network reached 5,874 stores. —KG, GMA News