Jollibee bullish despite weak China market

MANILA, Philippines — Homegrown fast-food giant Jollibee Foods Corp. (JFC) remains optimistic on its growth targets for the year despite prevailing headwinds in China.

JFC’s China business, which contributes to around eight percent of the group’s topline, declined by 3.7 percent in the first quarter compared to a strong same store sales growth a year ago.

“We’re in for the long term (in) China. But we recognize that in the short term, it is going to be bumpy and has been bumpy in the first quarter and it will probably continue to be bumpy,” JFC chief finance officer Richard Shin said.

The decline in the group’s China business is due to a softening of the consumer market.

“China is going through a rather challenging time right across all sectors of industry and businesses and I think that we all understand that there’s some geopolitical tensions driving some of that. There are some issues around property markets. There’s some confidence issues around their stock market. And of course, consumer confidence level is also slightly down as well,” Shin said.

“China has been a challenge I think for most businesses, and we’re not excluded from that. Recognizing that, what we’re doing of course is being very careful with our capital allocation and investments. And we’re being very careful in how we want to expand as well,” he added.

Nonetheless, JFC will still slowly expand in China, with plans to build around 100 new stores to add to its existing 560 stores.

“And the reason why we need to expand is that in places like tier three and four locations, we do not have all of our brands represented so we’re expanding through a franchise model,” he said.

At present, 85 percent of JFC’s store network in China consists of Yonghe King while the balance is composed of Tim Ho Wan and a regional brand called Hong Zhuang Yuan.

Despite challenges in its China business, JFC finished the first quarter on a high note, surpassing its profit target for the period.

It posted a net income attributable to equity holders of the parent company of P2.6 billion, up by 27 percent and a 10.4 percent increase in system-wide sales to P86.8 billion.

The group is maintaining its guidance for the year including a system-wide sales growth of 10 to 14 percent, same store sales growth of five to seven percent and operating profit growth of 10 to 15 percent.