Max’s Group Swings Back to Profitability As Margins Surge

Max’s Group, Inc. (“MGI” or the “Group”), the largest casual dining restaurant group in the Philippines, is reporting its operating results for the fourth quarter and full 12 months ended December 31, 2021.

Photo Insert: Max's has erased its pandemic losses.

Despite the industry facing various challenges brought about by the pandemic as well as local restrictions significantly tempering sales, MGI managed to swing back to profitability in 2021 ending the year with a net income of P451 million, a P2.1 billion swing from the losses incurred in the prior year.

Margins are likewise healthy and are trending better or close to pre-pandemic levels. Gross profit margin is at 31% while operating income margin is at 11% despite the tempered sales and revenues for the year.

“2021 proved to be a milestone year for the Group as it successfully navigated through a difficult year and managed to reverse the significant losses incurred in 2020, while at the same time transforming its business model to move beyond being just restaurant operators and enter into adjacent industries, establishing ourselves as manufacturers, merchants, and distributors” stated President Ariel Fermin.

“Our transformation was fast and agile. We did not waste the opportunity that this pandemic gave us. We have successfully remastered our fundamentals, strengthened our core, and revolutionized our business model. MGI is ready and cautiously optimistic for the coming year.”

Fourth-quarter seasonality coupled with more relaxed restrictions gave a significant boost for the Group as MGI posted fourth-quarter systemwide sales (“SWS”)—comprised of sales generated by both company-owned and franchised stores—of P3.90 billion, a 29% increase from the prior year’s P3.01 billion and already at 70% of 2019.

This significant recovery was achieved despite dine-in constraints still in effect, and with two core brands, Max’s and Pancake House, being more dine-in-dependent in terms of respective business models.

For the full 12-month period of 2021, the Group recorded total SWS of P12.52 billion, a 15% growth from 2020 despite various lockdowns—even in cognizance of 2020 reflecting almost one full quarter of pre-pandemic sales.

This increase in sales was also boosted by a faster recovery of the Group’s International business posting a 33% growth versus the prior year, and has recovered faster compared to the local market as less stringent lockdown measures were in place. International business is already approaching pre-pandemic sales level, and future expansion plans are in place for the coming year.

Delivery channels continue to provide a boost in SWS as restrictions were in place throughout the year. The Group’s delivery sales increased by 50% from the prior year and are already more than double 2019’s pre-pandemic delivery sales level.

This sales channel will continue to provide upsides to the Group even as dine-in gradually comes back with lesser restrictions.

“Core brands continue to drive the demand and increase in SWS while the other brands were strategically placed in cloud kitchens which added extra boost in sales without the significant CapEx involved in opening a standalone brick-and-mortar store. With each brand having its unique profile and culinary offering, the Group is in a good position to have a better reach across market segments. Yellow Cab and Krispy Kreme are recovering faster, as these brands were primarily delivery- and takeout-centric even pre-COVID; their relevance and resilience have carried us well. Max’s and Pancake House are expected to have a hockey stick recovery once dine-in restrictions are relaxed, creating even greater upside from their already-respectable recoveries in 2021,” continued Fermin.

Revenues, which comprise restaurant sales, commissary sales, franchising, and other revenue, increased by 7% to P7.64 billion from P7.14 billion in 2020. Even with a tempered topline, the more efficient model that the Group established during the pandemic proved to be effective as the Group returns to profitability.

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