Smashburger, Red Ribbon hurt Jollibee’s profits in H1 2019

Ralf Rivas
Smashburger, Red Ribbon hurt Jollibee’s profits in H1 2019
Jollibee's net income for the 1st half of 2019 drops by 34.4% to P2.7 billion, mainly due to Smashburger's losses and lower sales from Red Ribbon

MANILA, Philippines – Jollibee Foods Corporation’s earnings for the 1st half of 2019 were dragged down by Smashburger and Red Ribbon, the company said on Monday, August 5.

In a disclosure to the Philippine Stock Exchange, Jollibee reported a net income attributable to the parent company of P1.1 billion for the 2nd quarter of 2019, a steep 50% drop from the 1st quarter.

From January to June, Jollibee earned P2.7 billion, 34.4% lower compared to the same period in 2018.

Jollibee attributed the lower earnings to losses incurred by Smashburger, as well as manufacturing expenses and lower sales of Red Ribbon during the period. (READ: Stocks to Watch: Jollibee in charts)

“On Smashburger, we introduced major changes that created short-term disruption in sales and profit but will drive sustainable sales growth and strengthen the brand health,” said Ysmael Baysa, Jollibee chief financial officer.

Meanwhile, Red Ribbon sales were hurt by a supply shortage, as it transferred its main production facility to a new commissary south of Metro Manila.

Jollibee said the costs incurred during the period were “extraordinary” and are expected to be much lower in 2020.

The lower earnings come as Jollibee pushes through with acquiring The Coffee Bean and Tea Leaf for $350 million. It said Coffee Bean will add to its profit within 12 to 18 months of acquisition.

“We continue to aim to achieve the profit level in 2020 and in the years ahead that we set two years ago despite the profit challenges in 2019 which are short term and sustain our historical profit growth rate moving forward,” Baysa said.

Jollibee noted that it had turned several acquisitions into more profitable businesses. Yonghe King and Hong Zhuang Yuan in China, as well as Red Ribbon, Mang Inasal, and Highlands Coffee contributed 25% of its worldwide sales and 37% of its operating income in 2018.

Its worldwide sales for the 1st half of the year grew by 13.8% to P113.8 billion. Philippine-based businesses grew by 10.2%, while foreign businesses grew much stronger by 24.9%.

Jollibee opened 170 stores from January to June, 111 of which are in the Philippines. – Rappler.com

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Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.