Sapphire Foods expects muted consumer sentiment till third quarter this fiscal

"While the margins have seen a contraction, we have got to look at the entire picture. We have consistently said that post-Diwali 2022, we have seen a softening of consumer demand and that has translated into lower same-store sales growth (SSSG) across both brands, and also in Sri Lanka," he told CNBC-TV18.

Purohit said, given this, the KFC business delivered a strong financial performance, while the Pizza Hut is where the sales trajectory has continued the way it has been over the last three quarters.

Talking about KFC, he said, "We've grown topline at 21 percent, store growth has been at 30 percent. Therefore, we have had flat same-store sales growth. Normally when you have flat same-store sales growth, you'd see operating deleveraged kicking in, but we've still delivered one of our highest restaurant EBITDAs.

On Pizza Hut, he said, it has also had some negative same-store sales growth, therefore operating de-leverage contributed to lower restaurant margins of 9 percent. In the same quarter last year, it was around 14-15 percent, he said.

Sapphire Foods' Sri Lanka business is also now stable and is beginning to recover. However, restaurant margin have been hit a bit and the company delivered 13 percent margin.

"So if you look at the combination of the three, KFC delivering higher restaurant margins, Pizza Hut much lower and Sri Lanka a little lower, has contributed to our consolidated EBITDA coming in at 18.8 percent--a little lower than last quarter," he said.

Purohit said he does not see any remarkable improvement in consumer sentiment at the moment till probably the third quarter. "I expect that towards the end of the year and beginning of the next one, we should see an improvement in sentiment," he said.

In the second quarter, it is usually the seasonality part that comes in because of festivals, especially for KFC, when there is a higher proportion of vegetarian sales.

But Sapphire Foods plans to focus on what is in its control -- product innovation, higher level of advertising, marketing spends and improving customer experience.

"On product innovation, KFC has launched a Rs 99 range, Pizza Hut revamped its entire range, the value that we are offering is at par with the rest of the industry, perhaps a little better. We've upped our marketing spends, especially on Pizza Hut. In terms of customer experience, we have been rated the number one franchise in the globe," he saud.