With Smashburger, Jollibee eyes bigger bite of US market

HOMEGROWN food giant Jollibee Foods Corp. (JFC) is taking a bigger bite of the American fastfood market, as it raises its stake in Denver-based chain Smashburger.

In a disclosure to the stock exchange on Tuesday, JFV said its wholly owned unit Bee Good!, Inc. (BGI) is buying 45% of shares in SJBF LLC, the parent of Smashburger Master LLC (Master), for $100 million in cash.

The deal, which is expected to be completed in one to two months, will hike JFC’s stake in the company to 85% from the current 40%.

“With this acquisition of more shares, JFC will have a more significant business in the United States. The US will increase its contribution to our worldwide system wide sales from 5% to 15%. We will be able to participate in the very large mainstream American consumer market in addition to serving Filipino- Americans there,” JFC founder and Chairman Tony Tan Caktiong said in a statement.

The company said the consolidation of Smashburger into JFC will increase the contribution of the international business to its system wide sales to 30% from the current 20%.

“We will eventually achieve our goal of 50-50 revenue split between the Philippines and foreign businesses even as our Philippine business continues to expand strongly since our foreign business is growing even faster. It will only be a matter of time,” Mr. Tan Caktiong said.

The Smashburger deal will also add 365 stores to JFC’s worldwide store network, bringing the total to 4,162.

Smash burger’ s 186 company owned and 179 franchised stores are located in 38 states in the United States and 10 foreign markets, including Costa Rica, United Kingdom, Egypt, El Salvador and Panama. This will widen JFC’s geographical presence to 21 countries outside the Philippines.

HIGHER PROFIT

Meanwhile, JFC said it grew its attributable profit by 15% in 2017, fueled by an aggressive store expansion program that saw the opening of 465 new stores last year.

In a disclosure to the stock exchange on Tuesday, JFC reported a net income attributable to the parent of P7.089 billion in 2017, higher than the P6.165 billion it posted in the year before.

Full year revenues rose by 15.6% to P131.57 billion, boosted by a 15.2% growth in system wide retail sales to P171.77 billion. System wide sales measure all sales sold to customers of both company-owned and franchised stores.

Sales from the company’s Philippine restaurants increased by 13.2%, while those from overseas stores accelerated at a faster clip of 23.4%.

The profit growth translated to a 14.2% increase in earnings per share to P6.561. JFC, however, reported operating income margins slowed by 0.3% in 2017, triggered by the rapid increase in cost of raw materials and freight, in addition to store and manufacturing expenses.

“Gross profit margins in the Philippines were below year ago level as our rate of price adjustments was behind cost increases, following JFC’s practice of implementing gradual price adjustments in order to help consumers adapt to rising inflation,” JFC Chief Financial Officer Ysmael V. Baysa said in a statement.

Mr. Baysa said the company looks to recover profit margins this year.

For the fourth quarter alone, JFC’s attributable profit climbed 11.7% to P1.98 billion, on the back of a 17.2% growth in revenues to P37.06 billion. System wide sales from October to December, meanwhile, jumped 16.9% to P48.38 billion.

The listed firm said the positive performance for 2017 was mainly due to the addition of 465 stores under its network — the most number it has opened in the past 39 years. Of this, 328 are located in the Philippines, while 137 are abroad. This brought JFC’s store count to 3,797 by the end of 2017, 16.7% higher than 2016’s 3,253 stores.

A total of 2,875 of these stores are in the Philippines, with 1,062 under Jollibee, 526 under Chowking, 272 under Greenwich, 427 under Red Ribbon, 495 under Mang Inasal, and 93 under Burger King.

Overseas, the company has 922 stores under various brands, namely: Yonghe King, Hong Zhuang Yuan, Dunkin’ Donuts, Jollibee, Red Ribbon, Chowking, Highlands Coffee, Pho 24, and Hard Rock Cafe.

This year, JFC intends to continue expanding its global store network as it allocated P12 billion in capital expenditures. The allocation is 36.5% higher than JFC’s actual spending of P8.8 billion in 2017.

Shares in JFC lost P6 or 2.12% to close at P277 apiece at the Philippine Stock Exchange on Tuesday.