Jollibee will be closing 255 stores

According to website Rappler, the country's fast food giant suffered a net loss of US$24.4 million (P12 billion) in the first half of 2020.

The iconic fast food giant also saw its shares take a dip, with US$2.2 billion wiped out in market value - the worst performance in the Philippines stock exchange in two decades.

In the Philippines alone, Jollibee Foods Corporation controls around 56 per cent of the country's US$5 billion fast-food market.

During the recent lockdowns, half of its outlets around the world had to be shut down temporarily in the second quarter. To put things into perspective, the fast food giant has 3,286 stores in the Philippines and operates 2,588 stores across the globe. That's close to 3,000 stores closed.

This led to a 48.4 percent decrease in sales to US$6.3 billion (P30.7 billion).

While some 88 percent of its outlets reopened by the end of the second quarter, the damage was already done as dine-in customers dropped and revenues fell by 46.6 percent to US$4.8 billion (P23.3 billion).

If an investor were to observe the company's performance from a year-to-date basis, revenues took a dive by 25.3 percent to US$1.28 billion (P62.8 billion). Sales slid by 24.5 percent to US$1.75 billion (P85.8 billion).

What caused these significant losses?

Sure, COVID-19 is certainly the main catalyst. But if one is to peer closely at Jollibee's accounts, there were other factors that played a role too.

According to Rappler, the losses came in the form of emergency aid for its affected employees. The fast food giant also assisted frontliners as well.

Here's what Jollibee is doing to brave the storm.

"The business results were very bad but in line with our forecasts. We are now focusing on rebuilding our business moving forward along with implementing major cost improvement under our business transformation program," Jollibee chief executive officer Ernesto Tanmantiong said.

Some 255 company-owned stores will be closed with 95 having to switch in ownership, according to Jollibee chief financial officer Ysmael Baysa.

"The spending for business transformation includes closure of 255 company-owned stores, change in ownership of 95 stores from company to franchisees, payment of pre-termination penalties of stores in the US and China, closure of supply chain facilities, and reduction in the size of the organization in various countries where we do business," Baysa revealed.

Despite the gloomy outlook, there's still hope in the form of new products, delivery systems, and cloud kitchens.

Jollibee expects to be back in the green by 2021 with a projected growth rate of 15 percent in 2022. These projections were calculated based on the assumption that lockdown restrictions will not be imposed again.

The fast food giant will also be opening 338 more stores in 2020 and aims to make Smashburger and The Coffee Bean and Tea Leaf profitable the following year.

Source: Peso Economics