For the first time in 19 years, globalizing fast food chain Jollibee Foods Corp. (JFC) suffered financial hemorrhage in the first quarter as lockdown measures triggered by the coronavirus pandemic bludgeoned operations in mainland China, the Philippines and other overseas markets.
JFC incurred a January to March attributable net loss of P1.79 billion, reversing the P1.46 billion net profit posted in the same quarter last year as the pandemic disrupted global operations just when the company was still digesting the impact of its acquisition of The Coffee Bean & Tea Leaf (CBTL).
“JFC’s financial performance in 2020 will not be a good one. It will incur even higher losses in the second quarter when the full impact of the lockdowns on the business will be felt,” JFC chief financial officer Ysmael Baysa said in a disclosure to the Philippine Stock Exchange on Thursday.
Shares of JFC fell by 4.84 percent to close at P116.10 per share on Wednesday after the first quarter results were disclosed, giving it a market capitalization of P135 billion. The company is now valued at just a third of its market capitalization of P364 billion back in January 2019.
The last time JFC incurred a quarterly net loss was in the fourth quarter of 2001, when it lost P27 million. Back then, JFC had yet to expand to mainland China, the United States or other overseas markets.
“Results are clearly disappointing as JFC will most likely end the year with losses while most analysts were expecting it to remain profitable,” said April Lee-Tan, head of research at COL Financial.
JFC’s system-wide sales grew by a modest 1.6 percent year-on-year to P55.15 billion as the company had to shut down a high number of stores in mainland China, where the pandemic started, and eventually in the Philippines and other major markets abroad.
In March alone, system-wide sales contracted by 32.5 percent from 15.7 percent in February compared to year-ago levels due to the lockdown measures imposed in China, the Philippines, the United States and other markets. As of end-March, 69 percent of stores in the Philippines remained closed, while 6 percent of stores in China were closed, 16 percent in North America and 23 percent in Europe and the Middle East.
Excluding the impact of the consolidation of CBTL, JFC’s system-wide sales contracted by 10 percent year-on-year in the first quarter. As of end-March, 32 percent of CBTL stores were closed.
Revenue contracted by 2.3 percent to P39.43 billion in the first quarter. Operating costs surged as JFC provided an emergency response fund for employees and workers, assistance to medical front-liners and support to low-income households. The consolidation of losses from CBTL further jacked up operating losses, particularly due to higher general and administrative expenses.
“We expect the business to start recovering in the third and fourth quarters but we assume that the recovery will be slow,” Baysa said.
But Baysa said JFC’s strong balance sheet would allow the company to withstand the current storm, “even in worse-case scenarios.”