Shakey's Pizza Asia Ventures, Inc. (SPAVI), one of the Philippines' largest food service operators by store count, reported a 40.7% decline in second-quarter net income to P97.7 million, down from P164.9 million in the same period a year ago, as escalating operating costs outpaced revenue growth.

In its quarterly financial disclosure to the Philippine Stock Exchange on Thursday, the company said revenue for the three months ended June rose 5.9% to P4.17 billion from P3.93 billion. Net sales increased 6.4% to P3.96 billion from P3.72 billion, while royalty and franchise fees slipped 1.3% to P209.1 million from P211.9 million.

Cost of sales climbed 7.4% to P3.33 billion from P3.10 billion — outpacing revenue growth — leaving gross income essentially flat at P840.5 million compared with P836.1 million a year earlier. General and administrative expenses surged 24.7% to P589.3 million from P472.5 million. Interest expense eased slightly to P116.8 million from P118.3 million, while other net charges rose to P32.5 million from P27.1 million.

Pre-tax income fell by more than half to P101.9 million from P218.3 million. A sharp reduction in income tax expense — down to P4.2 million from P53.4 million — partially mitigated the decline in bottom-line earnings.

For the first six months of the year, SPAVI's net income dropped 33.3% to P231.5 million from P346.9 million, while revenue grew 9.1% to P8.17 billion from P7.48 billion.

Systemwide sales rose 12% to P13.02 billion, driven by continued store-network expansion that offset broadly flat same-store sales in both the second quarter and the first half. The company noted that same-store sales held steady despite the impact of the ongoing conflict. The flat same-store sales performance reflects a broader trend across the Philippine food service sector, where consumer traffic has been sensitive to persistent inflationary pressures on household budgets.

SPAVI said new stores were the primary driver of its topline performance, while ongoing investments in network expansion — including store renovations and pre-operating costs for new locations — pressured gross profit even as input costs improved. Operating expenses as a percentage of sales reached 13.9%, up 130 basis points year on year, reflecting increased spending on brand-building and demand-generating initiatives.

Core net income after tax declined 26% to P315 million from P427 million. Core earnings before interest, taxes, depreciation, and amortization (EBITDA) edged up 1% to P1.13 billion from P1.11 billion.

"Despite the tough environment, we continue to see bright spots across the portfolio and remain confident in the long-term growth prospects of our brands," SPAVI President and Chief Executive Officer Vic Gregorio said in a statement. "We continue to expand our network, at a measured pace and higher hurdle rates, as we exercise investment discipline. While expansion has near-term impacts on our bottomline, it also positions our brands for long-term value creation."

As of June 30, SPAVI operated 3,039 stores and kiosks — a combination of company-owned and franchise outlets across the Philippines and overseas.

The company is also restructuring its Peri-Peri Charcoal Chicken network, acknowledging that the brand has been more exposed to the current operating environment than its more established businesses. The Philippine charcoal chicken segment is highly competitive, with multiple domestic chains vying for market share.

"We acknowledge the need to reset our approach," Mr. Gregorio said. "While brands like Shakey's and Potato Corner showed the ability to withstand headwinds, less established brands like Peri-Peri are more vulnerable in this challenging environment. We are using this period to restructure our network, optimize cash usage, and strengthen portfolio fundamentals that will position our group for better days ahead."

SPAVI indicated that early third-quarter results showed improvements across its brands, but cautioned that demand and cost conditions remain volatile. The company expects the Peri-Peri restructuring to weigh on 2026 earnings, with the measures designed to enhance performance in 2027.

"Our 2026 reset will have near-term impacts to our bottomline; nevertheless, it will position the Group to deliver a much better 2027," Mr. Gregorio added.

As of end-June, SPAVI held P919.3 million in cash and P6 billion in interest-bearing debt. Capital expenditures totaled approximately P393 million during the first half.

SPAVI shares declined 0.34% to close at P5.95 each on Thursday. — Alexandria Grace C. Magmo

Source: Bworldonline