Shakey’s Pizza Asia Ventures Inc. (PSE: PIZZA), the Philippines’ leading chained full-service restaurant, posted a 12% increase in system wide sales, sustaining its double-digit growth momentum in 2018.
Its combined company-owned and franchised stores hit sales of PhP9.36 billion, driven primarily by the opening of 20 net new stores locally. This brought the company’s Philippine store count to 228 as of end-2018.
Same-store sales growth likewise remained healthy at 4%, in line with the company’s annual target of 3 to 5%. This, notwithstanding a more challenging second half due to weakened consumer sentiment brought about by higher inflation.
“2018 marks our fifteenth year of consecutive double-digit sales growth. The sustainability of our expansion is a commendable feat by all measures. Last year however was especially challenging given the headwinds in consumer spending and the continued entry of new competitors in the dining out space. Thankfully, we managed to weather these due to a loyal brand following, various value-for-money promotions, new product launches, and the reliable service execution that Shakey’s has always been known for,” said Vicente Gregorio, president and CEO of Shakey’s.
In 2018, the company saw total revenues grow 8% to PhP7.58 billion for the 12-month period. In terms of profitability, gross profit was up 5% to PhP2.18 billion, translating to a 70-basis point drop in gross profit margins to 28.8%.
This was driven mainly by various cost pressures, including higher raw material prices and a weakened local currency, combined with the impact of various sales-supporting initiatives.
Earnings before interest, taxes, depreciation and amortization (EBITDA) grew at a faster clip of 7% to PhP1.5 billion, following a 30-basis point drop in EBITDA margins.
Nevertheless, Shakey’s was able to maintain industry-leading profitability with margins of 20% for EBITDA and 11% for net income as of end 2018. The company’s return on equity likewise held steady at 20%.
“The good news is we saw profit improvements during the last quarter despite compression in our margins for most of the year. Towards year-end, we benefited from the softening of certain raw material prices, which were then supported by more judicious promotional spending and the operating leverage brought about by seasonally strong December sales,” said Gregorio.
All in all, audited earnings for full-year 2018 came in at PhP841 million, 10% higher relative to the previous year.
In 2019, Shakey’s is set to open another 20 net new stores in the Philippines targeting a nationwide store count of 248 by the end of this year.
Internationally, the company currently has three outlets in the Middle East, where strong sales there are supported by a large overseas Filipino base. With two international area development agreements signed up, its total international pipeline is at least 20 outlets over the next few years.
Shakey’s also recently announced the acquisition of Peri-Peri Charcoal Chicken, an emerging fast casual and full service brand which has demonstrated consistent profitability, brand strength, and robust growth in both system wide sales and store count over the last few years.
“We are excited about 2019 amidst today’s dynamic restaurant landscape. In this environment, we will intensify further our efforts to improve the effectiveness and efficiency of our operations, focusing primarily on superior execution this year,” said Gregorio. “Notwithstanding any short-term challenges, we remain confident in the long-term growth of the casual dining space. We intend to continue taking advantage of this via the ongoing expansion of Shakey’s – and soon, the expansion of Peri as well. As we grow both businesses, we aspire towards a portfolio of ‘WOW BRANDS’ which will hopefully serve as Filipinos’ go-to options for affordable yet premium dining out experiences.”