... Jollibee Foods first quarter post results call. I'm Hazel Tanedo from AB Capital, and I'll be the moderator for the session today. Together with me, Miss Divya Gangahar from Morgan Stanley. So to give us updates on Jollibee, as well as the company's strategies and plans for the next 12 months or so, our speakers for today are, of course, Mr. Richard Shin, Jollibee Foods CFO, and Miss Cossette Palomar, Investor Relations for Jollibee Foods. So thank you for being with us today, Richard and Cossette. I hope you guys are well, as good as the first quarter performance. So before we start, a few reminders. As Mr. Shin goes through with the presentation, you may type your questions and send it through. Secondly, I think, Cossette, you have a few reminders before we start.
Yes. Thank you, Divya. Thank you. Good afternoon, everyone, and welcome to Jollibee Foods Corporation's first quarter earnings call. Joining us today, as you know, Hazel said, is Mr. Shin. So before we get started, I would just like to remind you that some of the remarks today may include forward-looking statements that are based on certain assumptions of management, and are subject to risks and opportunities or unforeseen events. Actual results could differ materially from those contemplated in the relevant forward-looking statement, and the JFC gives no assurance that such forward-looking statements will prove to be correct or that such intentions will not change. All subsequent written and oral forward-looking statements attributable to the JFC group or persons acting on behalf of the JFC group are expressly qualified in their entirety by the above cautionary statements.
Okay, so, turning over to Mr. Shin now.
Okay, good afternoon, and good morning to those of you who are dialing in from different time zones, and a very good early morning to those guests from the U.S. Thank you so much for taking the time and effort to join us today. I'll speak or present or update for about 30 minutes, and I'm very happy to then go to live Q&A to see if there's any questions that I can address. First and foremost, we are tracking to guidance and slightly above with sustainable growth and margins. What that translates to is a system-wide sales growth. It's a record again of PHP 86.8 billion delivered for the quarter, first quarter.
And compared to the same first quarter of 2023, and let me remind you again, that 2023 first quarter was a record quarter because it came off of a COVID-impacted Q1 of 2022. So we lapped that quarter with a 10.4% system-wide sales growth. And I'm happy to say that a good contribution of that from rolling days or same-store sales, so 5.5%, as an enterprise. And 5.7, so over index to that, came really from traffic or volume, which is to say we did not take price increase, and we had a little bit of a, a mixed impact in there, which I'll address a little bit later. Revenues coming off of, the system-wide sales, was PHP 61.3 billion or 11.3% positive gearing versus last year.
Gross profit, and the way we measure gross profit here is, the cost of inventory, that's food and raw materials, but also cost of labor, store rent, commissary costs, supply chain. So the entire cost really, that is really above, overheads or G&A and A&P. So we delivered a margin rate of 18.3%, which represents a 10 basis point improvement versus Q1 of 2022, and this translated into a 12.1% growth rate. Our operating income also did very well, grew by 13.7%, and landed at PHP 4.1 billion for the quarter.
Therefore, our OPM margin is 6.7%, and our net income after tax, getting closer to earnings per share data, we landed at PHP 2.6 billion or 26.9% versus last year, representing a NIAT margin rate of 4.3%. So again, I want to emphasize that a top-line growth revenue of 11.3% delivered a bottom line positive operating leverage gearing of 26.9%. In addition to financials, we received some recognitions in the tail end of last year, coming through to the first quarter of this year, which demonstrates that we are being seen as a world-class organization. And what do I mean by that? For the first time in the history of Jollibee Foods Corporation's 46 years in existence, we've now entered TIME's World's Best Companies.
That's 750 of the top best companies in the world, as rated by TIME. We were one of six companies from the Philippines, and we're very honored to be on this list for the first time. In addition, for the third time, we won Exceptional Workplace Award from Gallup, so we're very proud of that, which also means that we have a very strong and happy and motivated workforce. In Vietnam, the reason I wanted to share Vietnam is because outside of the Philippines, Vietnam is actually our largest Jollibee brand market, with nearly 190 stores, and it's pretty much all Vietnamese staffing there, local staffing. Having said that, they also won a Best Place to Work award in Vietnam. So extremely proud to see growth outside of the Philippines for this brand as well.
In addition to the organization and financials, I also wanted to update those of you on this call some recognitions we've received around the Jollibee brand. In Q4, I talked about our ranking globally, but here it's a bit more specific to the Philippines market, where Jollibee, Mang Inasal, and Chowking were all awarded with mentionable rankings, and I'll show you the rankings in a second. In addition, we received some brand recognition for our Highlands Coffee brand in Vietnam. So specifically in the Philippines, we were voted number two in terms of the top 10 most valuable Filipino brand in 2024. This represents a rank up of two positions, as you can see here, just below BDO and just above Globe.
On the left, you see Mang Inasal ranking first, actually, as the top 10 strongest Filipino brand in terms of growth, so the movement was quite significant. Jollibee continues to move up, so it's on that listing as well. And in terms of brand value change, you can see our three champion brands in the Philippines, Jollibee, Mang Inasal, and Chowking, all performing very well. In Vietnam, we ranked number 6, but within the F&B, or within the coffee space to be more specific, you can see we are top at number 6 here on the restaurants and fast food category. So very proud of the team for accomplishing this. And this is a movement from 28th place a year ago. Right, let's get on to performance summary. Again, big picture first.
System-wide sales, as mentioned, 10.4% growth, gearing up to 11.3% on revenue. Same-store sales, 5.5. Our store growth rate was 5.3%, but I'll speak a little bit later during the Q&A, as some of you may have questions around our store closures for the quarter as well. Our gross profit, as mentioned earlier, net operating income and NIAT all mentioned earlier. So just a recap. Our first quarter, 2024, represent the highest of first quarters. As you know, there's some seasonality in our business, so at PHP 87 billion deliverable, this was yet another record. So you can see for the past nine quarters, we've been achieving some sort of record in terms of the best quarter or best all-time high.
So this momentum, we believe, will continue into the second quarter as we see some strong momentum. I also wanted to just put in context of our global peers that we track ourselves against. So this Yum! Brands is a global Yum!, not just Yum China, McDonald's, RBI, et cetera. JFC here at 5.5% Rolling Base or same-store growth rate. So you can see how it fares against some of the other QSR players. System-wide sales at 10%, also very strong on this list, and I think we're right in the midst of it with store growth as well. Top-line metrics for first quarter. Let me start again with the big picture. Philippines and international. Very similar system-wide sales growth rate, 10% for Philippine, 11% for international.
In terms of same-store sales growth, we can see Philippines is slightly ahead of international, whereas international is ahead of Philippines in terms of new stores and how that contributes to our system-wide sales. And I'll get into a little bit more detail of that here. So Philippines, top line, I think you've seen the numbers. Moving on to China. China was a bit of a challenge. Although we contributed to 3.6% growth through new stores, net-net, we were still down. I think this is very much in line with what we're seeing, versus Yum China and other published data out there as well. So it has been a difficult few quarters in China.
But nonetheless, we continue to build new stores, and we continue to expand capital- or asset-light into Tier 3 and 4 cities against our brand, Yonghe King. As I mentioned earlier, we'll continue to do that. North America has our Asian brands, also Jollibee being the primary brand there, plus Smashburger. If you see North America's growth rate was one of the highest. I'm very happy to say that our Jollibee brand is doing very well in both the U.S. and Canada. We have about 72% of business coming from the U.S. and 28% of business coming from Canada. So collectively, North America, with a very robust same-store sales growth of 10%, driven, you know, to a large extent by transaction count or volume.
We're also opening new stores, and that's where we get this 8.4 contribution, with some Forex upside on the system-wide sales. Smashburger, March is doing better than Feb, and Feb's doing better than Jan, so we're starting to really ramp up on average daily sales. We're not quite there yet in terms of rolling base growth, but nonetheless, I'm seeing a lot of very positive work being done under the new leadership of Denise Nelsen, who joined us mid-January of this year from a very large organization. And she, in fact, is a very experienced operator in North America. Europe, Middle East, and the rest of Asia, excluding China and Philippines, of course.
You can see we've carved out Vietnam just to show you the size and scale of that growth, but also Jollibee in the rest of our regions, and Chowking as well. You can see significant growth coming from these brands. So Jollibee is growing, and not just in Philippines, but outside as well. Our coffee and tea business here, our largest one, The Coffee Bean & Tea Leaf, had a 16% top line growth from system-wide sales, and mostly from new stores as we start to franchise out pretty rapidly, but also 2% same-store sales growth. In contrast, earlier, I showed you Starbucks number. I know it's a different scale business, but nonetheless, I think it's a good comparable. SuperFoods Group, we had one of our better month in March, and we'll see continued improvement. So this is a Highlands Coffee.
Earlier, I spoke about some headwinds, some macro headwinds. In Vietnam, we're now seeing signs of coming out of that. This is also to say we're picking up market share because our performance is still ahead of the industry. So first quarter, we picked up a 4% market share. Milksha continues to be a good acquisition from 2022 and continues to contribute. Okay, now let's take a little bit deeper dive into what that means in terms of channel and some consumer behavior. I think this is important to understand. So what I have here quite a bit of data, so let me walk you through. So dine in column of first quarter, growth percentage versus last year first quarter.
Digital, as defined by the way the consumers order, so it could be a self-order kiosk in the store, or it could be online. Other off-prem depicts takeouts, drive-throughs, and pickups. In the past, we used to combine quite a bit of this under off-prem, but I wanted to just make sure that we carve out the digital story, highlight the fact that our dine in is growing. So the reason why we're growing in the Philippines amidst inflation and some of the other challenges we're seeing with other consumer goods company in Philippines, is that our consumers, both existing and new ones, are coming to the store. So 11% growth coming from dine in. Overall, international, similar pattern, 11.8% growth from dine in.
So globally, dine in is growing at 11.3%, which is good. So our investment in the stores and our branding behind the stores are getting its leverage impact. Digital, as you can see, it's also a significant growth, 21.4% in the Philippines, 22% international. So our international business is growing. I just wanna make sure that point is has landed because when we look at the bottom line, we're not seeing the same level of margin growth, and that's because of the investment levels below EBITDA. So globally, 21.7%. What's interesting here is if you look at the, I guess, the significance of the quantum, PHP 10 billion versus PHP 22 billion, so half our business relative dine in to digital, it, you know, that's, that's quite a significant part of the business.
Then when you add on the pickups and the drive-throughs and the take, takeouts, PHP 19 billion, actually, that combined combination of 19 and 10 is actually a bigger part of our business. So we'll continue to invest in technology, which is what I've been saying, from early last year. And you can see similar, similar trend. So North America, we all know, drive-through is a big component of our store sales, so it's PHP 6.4 billion versus dine in and digital of 2.4 and 2.2. So I wanted to show this level of detail just to let you know that, these are sustainable growth, and it's coming from strategies that we've been implementing, to make sure that our stores has the best consumer experience. Now let's get, into the financial details.
So some of this is repeat again. So you've seen system-wide sales, revenue, gross profit, operating. You see here the rates and the basis point improvement on the rates. EBITDA, so this is a new data point now, PHP 8.9 billion. So we are now running our business at 14.6% EBITDA margin rates, which is 80 basis points above same quarter last year, and that's a significant growth of 17.9% on EBITDA. Net income, you can see here, growth plus, as a percentage of revenue and what that means in terms of margin rate, we're up again, and year-to-date we're up. And a very important number, EPS. So, we're ahead of guidance. Bloomberg guidance, I think, had us at PHP 2.0, so we're delivering a PHP 2.2 EPS.
This just summarizes our key operating margin KPIs that we track. This table shows you the difference. Again, I think there's a lot of question around: Is international okay? We understand Philippines looks good, but is international okay? And the answer is yes, it is okay. There are significant investments below EBITDA in people, so that comes in as G&A costs as well that we are going to start leveraging as the top line continues to grow at the rate that I've been showing you. So, let me break down EBITDA by region. So China's EBITDA is up 12%. Sorry, I should start with Philippines. Philippines is up 19.5%. China's is up 12%, North America is up 61%.
Coffee and tea is starting to traction well because the gaps were wider in earlier quarters. Rest of the world, India, et cetera, we're up 78%, and we'll continue to expand Jollibee outside of Philippines and US as well. Our balance sheet, and I shall continue to use the word fortified, because everywhere I look at it, I'm very proud of this balance sheet. It is strong, and it continues to get tighter and stronger amidst inflation. What do I mean by that? In KPIs like days collection, again, this I think is like the fourth or fifth quarter we've improved collection days, so we're getting cash quicker. So now it's 12 collection days, down two days from 14.
Inventory days, I remember about a year and a half ago, we started in the high 50s, and we kept bringing that down. But there's a reason for that, because of the uncertainties of supply chain security. That's always gonna be the case. As we know, global tensions are still there, geopolitical risks are still there, but nonetheless, we are comfortable now managing at lower inventory days, which frees up cash. So 37 days now, from 47. Very important KPI, given the cost of borrowing money, is quite significant. Days payable, slightly ahead or faster, if you will, but we're getting better terms as well for that in exchange. Current ratio improved, debt to equity ratio improved, debt to EBITDA ratio improved, and debt service coverage ratio improved. On the right-hand side, this is just more information.
So bank loans plus seniors, so debt and other obligations is around 60% of how we fund our business. And equity plus senior Perps and Preferreds, it's about 40%. So, we believe this is a good mix for a business our size at the moment. We're also very cognizant that our Preferreds are coming due, and we're gonna have to refinance that at a higher rate, given the market rate. So we're very cognizant of that, but we're also very confident that the investments that this money will go towards, will yield a higher, return on invested capital. Floating 73%, fixed 27%. And this is mainly around our more variable, term, bank loans, both term and, facilities. And then you can see here, on the split between our interests.
So, in short, strong, we're well-financed. We do keep a healthy balance of cash, as you can see here. We're still holding near PHP 33 billion of cash. The reason we do this is because, we never want to cut it so thin, for efficiencies. We wanna make sure that we're always in a position to be able to, not have any liquidity challenges. I want to, talk about Botrista, because, when we announced this, late March, the announcement, of course, it's a one-way announcement, so therefore, there wasn't a Q&A session on that. So I want today's session, to be able to address any questions. What it is, it's two words, robot, so bot, barista as in barista. So a company, that's very unique in the, trades, distribution, slash technology space.
What it is, it's an automated machine with over 100 different IP patterns, including self-cleaning, et cetera, which means essentially no additional labor. When these drink bots are placed into QSR store locations, it gives that store an opportunity to have a more significant contribution from their drinks strategy as part of their menu contribution. We've also seen trends whereby carbonated soft drinks may not always be desired by consumers. Of course, we still have our soda fountains, et cetera, with Coke and the Pepsis of the world, but this is giving an alternative to soda as well. Commercially, when we put these machines into our own restaurants, there'll be a you know, sizable uplift, which makes this investment actually a very quick payback investment.
But beyond that, we think this is a very innovative way, and we want to be part of this in terms of distribution strategy for beverage in markets like the U.S. So it's predominantly U.S., it's a U.S.-based company.... And as I've always said, we are in some ways underweighted in the U.S., and so I've also said that we'll look for strategic partners and alliances, so that we can actually muscle up, in the world's biggest QSR market. That goes for beverage as well. So, this is a strategic, intentional investment. It's an investment, it's not an acquisition, but we'll also get very good commercial, upside from this. The second item that's, been in the news, as well, on April fourth, we announced, Titan Fund.
Just as a reminder for those who may not be familiar, is a private equity registered in Singapore, and one of the brands it holds is Tim Hortons. And as you know, we have 4 strategic pillars, Chinese cuisine being 1. So we are 92% LP contributors to that fund. So it's the same fund, but this is now fund number 2. And as we all know, at some point, brands do exit funds, and once it does, then we'd like an opportunity because we enjoy working with this team to really just see what's out there in terms of synergies and being able to supplement and complement one of our 4 or 2 or 3 or all 4 categories of our 4 pillars.
So again, I wanna make it very clear, there's been no investment into this fund from us. We have a participation rate of 90%. We have not injected any capital or any identified investments, but we wanna think ahead, and we wanna make sure that we muscle up with good partners. So that's what this was. I think it's a good transition 'cause I know this is on a lot of people's mind, our capital allocation strategy, our acquisition strategy, and the rest. I wanna be very clear, we have not bought, and we will not purchase anything that is not strategically fitted into our tripling our NIAT in five years, which again, Q4 last year, we put the stake in the ground. We're confident enough, we've done the analysis, and we're confident enough to put that statement out there.
We are tracking, I know it's only been a quarter. We are tracking ahead of that, and I put this out there because it's important that we will not do random acquisitions, but it'll only be those that will enable us to deliver this, promise to our shareholders. Point number two in terms of investment criteria, superior cash returns. So, this will be measured by incremental EBITDA, both in terms of margin rates, but also dollar contribution. So the acquisitions will be funded by the acquired targets in the future. So again, we will not be acquiring businesses that require two, three, four years of patience and building up the cash returns. So that's a significant change as well. I think the third point just goes to emphasize again that it will be accretive multiple to our group EBITDA multiple.
We also will look for businesses, again, in those four categories only, where we believe that we're also acquiring talent, resources in place to drive winning performance, not just average performance, but a great team that is actually beating the competition in that said market. We've done well historically when we looked at single market acquisition. It's been a bit bumpy when we went a bit wider, but nonetheless, I think we've, as I've said in past earnings calls, we've learned our lessons with CBTL, that brand will do well. It is starting to turn its corner, and it's performing. There's many KPIs that I'll be proud to share in Q2. That's gonna make proof of the statement I'm making here.
So hard work has gone into it, but again, anything that we acquire in the future, we'll make sure that these learnings are incorporated. And fifth point, of course, is growth potential and target to market with a very focused ability to really drive operational leverage. Meaning, we don't need to add a ton of infrastructure or G&A, but we can really start to generate cash very quickly post-acquisition. So our process of due diligence, our process of thinking about fit and the rest of it, we have made a change in that. And I do wanna put this up front because I know I could have quite a bit of questions around this topic. Just to wrap up, we're on track.
So, SWS growth rate, RB growth rate, store network growth rates, and of course, our operating income and also, not published here, but our NIAT is on track to publish consensus. That's, that's out there from many of you who are on this call. So with that, I shall stop sharing the file and take on any and all Q&A. So we have about 30 minutes remaining.
Thank you, Mr. Shin. Just a reminder to everybody on the call, if you have a question, please, type it out and send it across to us, and we'll be happy to include it in the roster. We do have about, you know, half a dozen questions that have already come through. So let's go through those first. I'll try to group them. You know, some of them are obviously similar. So we can start off with the international business. The first question on the international business is that why has China's same-store sales growth become negative again? And have we actually lost market share? Are we seeing any improvement quarter to date?
How does Jollibee plan to differentiate itself versus leading retailers who are also expanding very rapidly there through the franchise model?
... Yeah. Thank you for the question. So in China, we are, again, as a reminder, only the Chinese QSR space. So we do look at public listed companies like Yum China, but we do understand that there are differences between Western QSR and Chinese QSR. So that's the first point. Having said that, I believe Yum China published that they were 3% down on their RB, and we were also 3%. Moving more towards tier three, four, and five. So, again, we're in it for the long run for China. It is bumpy. It is rough. The recovery from COVID has not come back, and I don't think this is new news for anyone on this call. I think you're seeing that in many sectors. So our decision is we will stay in China with Chinese cuisine.
We'll expand asset-light, i.e., franchise model. We'll work with the right sort of regional franchisees who are able to succeed because they know that region or their town or their city. Our price point is very attractive. So what we're trying to do is we're trying to really work on some hero menu brands. And the reason for that is there's so many choices out there. Roughly half our business passes through delivery, and when you're on delivery platforms, that's another world of discounting and all that stuff that we get into. So we wanna be very careful not to erode our margins away. But we're extremely positive in the sense that we're testing out a lot of different models, and we're starting to find models that are getting some good traction.
So I think we'll continue to report soft performance in China for the next little bit. The good news is it's not a big part of our business, so it's not gonna drag down our enterprise targets that we have set. But yeah, we're gonna, you know, weather through this one in China. So that's what we're seeing.
Got it. Thank you. The next question is, you know, on the two favorite brands that are most asked about always, CBTL and Smashburger. So specifically for Smashburger, the question is that the same-store sales growth was negative. Can you provide details and outlook for this business in terms of growth and profitability?
Yeah.
Similarly for CBTL, what was the EBITDA for both these brands in the first quarter? How did it change year-on-year, and what are the latest turnaround targets for both these brands?
Yeah. Okay. So let me start with Smashburger. So roughly, we have about 230 stores now, which is less than what we had last year, which is to say that... And you, you may have picked that up on the new store. It's actually negative, which means we've closed some underperformers and outlier stores that are in geographies where they shouldn't be. We've also converted and sold geographies to franchisees, who then are taking on a network development contract to build more stores. So certain places where we believe others can do better than we can because they have other businesses there and supply chain that, like I said earlier, we've done that as well. That is to say, then the P&L gets stronger.
It's also to say that we have royalty income coming in, which is more of a guarantee. What's very interesting is when you look at the franchise business and our company-owned business, it's roughly similar. But within franchise business, and there's what we call traditional or nontraditional and traditional. The nontraditional are things like airports, et cetera, and we're seeing significant growth in those places. So my conclusion is the brand isn't damaged per se. I think people are more conscious about, you know, whether they want a $10 better burger or whether they want a $5 QSR burger. So we're conscious about pricing and the rest of it. So we're gonna lean in now and really emphasize our strength, which is the quality of the burgers and so forth.
Operationally, since Denise has come on, and for those of you who don't know Denise, but she's certainly Googleable. She used to be a very senior executive at Starbucks for 25+ years, and she ran the Starbucks U.S. business at one point, along with a few other key senior executive roles. She knows company-owned stores, she knows franchise, franchising, she knows store ops. And one of the first things that we changed early on, so this is around February time, is that our variable performance incentives for our store operators, we shifted from two-thirds to variable cost controls to driving top line.
There's a history and reason why cost was an important focus for us, but this has yielded in your average daily sales going up because there's a lot more focus now on that component. So it will take a bit of time, not too long, but it is still a bit positive, and it will continue to traction well. On CBTL, we are starting to see month-to-month better performance. And again, I don't wanna pre-speak to Q2, but what's very interesting there is our U.S. company-owned store business is starting to perform in a different way, in a more positive and better way. And so we're very happy with all the work put behind there.
We have two other markets in the world that are company-owned, and that's Malaysia and Singapore, and, and those are very profitable markets. Malaysia, we're also starting to see some really interesting return of transaction count. So what happened in Malaysia in 2023 was over 400 new coffee shops came into that market, and most of them were in the value segment. And as you know, CBTL, we are not in the value segment, we're in the better coffee segment. So, we're not going to reposition the brand, that's the wrong thing to do. But what we did, for example, just again, this is very tactical, but I just wanna illustrate the point that the brand is not damaged or weak. We did a MYR 5.5 any and all drink, single drink on May 5.
So what happened there is we got 90,000 customers lining up for hours at our stores, you know, to purchase our product. So that tells us the brand is strong. It also tells us that there's an opportunity, and this was all done through social media and that, you know, digital side that I always talk about. And what's very interesting there is that there is a way to get stickiness, and there's a way to get repeat and so forth. So we're working on those opportunities as well. So we are accelerating our app launch and so forth. So CBTL is starting to, I would say, taper off into that trajectory of actually, you know, outperforming its peers.
But at the moment, we all saw Starbucks' earnings results as well, but that premium segment has been a bit challenging in some markets. But again, for us in the U.S., it's been slightly different experience in the most recent months.
Right. But maybe, you know, there are lots of questions that are actually asking for the Smashburger EBITDA number. Is that something that you can share? Because it, it seems that this quarter, that number wasn't there. And how does that compare year-on-year, and when do we kind of expect EBIT positive for Smashburger?
Yeah. So if it's okay, Divya, we'll get that circulated. We do have those numbers. And EBIT positive, our target is early 2026, EBIT positive. So we'll continue to improve on the positive EBITDA. And in terms of real money or dollars, it's, we're talking about $8 million-$9 million. Again, I know there's a lot of question on this brand, et cetera, but it's not a brand that is $50 million in the hole. We're very close to EBIT positive. We're already EBITDA positive, but we'll publish the specific numbers after this call.
Sure. The next question was just explaining why international EBITDA margins fell in the first quarter on a year-on-year basis. Which geographies and brands are the main drivers for the net income after-tax losses for the international business?
Yeah, I think... I mean, it's exactly what we've been talking about. So it's Smash, it's CBTL, and it's China. And so, you know, when we get those businesses gearing up again to growth, you'll see a significant uplift. Now, on a percentage, and I think one of the slides I showed showed gross profit as a percentage, it is slightly lower than the Philippines. But again, I want to emphasize, and I've said this in the past, on a unit basis, it's a lot more dollar. So, we have to look at dollar and percentage, because, for example, in the Philippines, what we're seeing with competition is they're doing add-on soft drink. So you buy a chicken, you get rice, and you can add on.
So add-ons typically are around 20-30 PHP for a soft drink. That is to say, less than $0.50. In the U.S., soft drinks are not $0.50, as we all know. They're closer to, you know, $2 or $3. So that's the kind of significant deltas on a unit basis. So, I think that's why we're seeing the numbers and the shape that way. But once those profitabilities come through, then you'll see those margin rates closing gap pretty quickly.
Got it. And maybe one last question on Smashburger that's come in is, again, a number question, if you have it. What is the current ADS for Smashburger, and where do you need it to reach?
Yeah
... basically, to become a bit positive?
I think that's a fair question. So we ended the year around $3,400. We're now running around $3,600 after Denise's leadership. I would love it to be at $6,000. We're not talking about breakevens. At $6,000, we're talking about, should we be thinking about IPO, type of level? But let's not get greedy. I think getting to $4,000 solves a lot of the profitability... negative profitability issues. Our organization isn't big, and we're keeping that very lean. So, the operating leverage on, on $4,000 per day will be quite significant.
Right.
We're getting there. Again, each day, each week, I'm starting to see these numbers inching up.
... then moving on to the second, you know, bits of questions. This is more on quarter-to-date trends in terms of same-store sales growth for both Phil, Philippines and international. Specifically, any indication that same-store sales growth for the Philippines can be maintained at the first quarter level, even also in the second quarter? And, do you expect the higher traffic to continue to drive same-store sales growth for Philippines?
Yes. So the short answer is, Q1 is not loaded with promos and loaded with, you know, sort of lapping on a soft quarter in the previous year. That's why I kept referencing Q1 2023 as a reference to Q1 2022, where Philippines was essentially locked down. So the answer is yes, because, what we're doing is fundamentally, what we're doing and what we're seeing fundamentally is, is the same as Q1. We're not taking price. We're not launching anything that is, sort of a one-off per se. I'm also very encouraged by the double-digit return in dine-in and twice the double-digit return, not return, but growth in delivery.
So I think, our challenge really it's not, not gonna be the Philippines, Rolling Base, but it's our opportunity really to penetrate quicker into outside of Metro Manila, where we're still under-penetrated. For me, I see that as more of an opportunity for growth.
Right. We have a bunch of financials related questions. The first of that is, what caused inventory cost to sales to increase year-on-year in the first quarter? Which input cost pressures are you seeing, and how are you dealing with high coffee prices?
Yeah. So inventory costs went up proportionally to our volume or revenue. So the absolute increase is because we're growing. But as you can see on a margin basis, which is inventory, you know, packaging costs, et cetera, you're seeing a uplift of 10 basis points. So, yes, inflation's a reality, and I'm not gonna say it's not. When we look at inflation, we look at it against the prior quarter, and we also look at it versus 2023 full year as well. What I'm saying is, it's flattish to December of last year for our basket of goods. That's not to say, because I think the published inflation rate in the Philippines, last I saw was 3.3% versus 8.3%, the same quarter, 2023. But again, that's the Philippines. I'm talking about our basket of goods.
Within that, what I'm seeing is things like rice is going up, and it's going up right across the board for, you know, for all companies. But packaging supplies is coming down at a high single digit inflation rate. So we've locked in pretty much all of our key supplies, like chicken, et cetera, and I think that's why we're able to live with inflation, manage inflation, and as you can see, we did not pass on any cost to the consumers in the first quarter. So I think it's important to look at dollar increases and look at that in terms of our business increase. So that's what happened there. Coffee price, I'm not the expert, but when I talk to those who are the experts in our business, we do forwards, et cetera.
It's going up, but it, it's not going up to the point where it's squeezing our margins. So we're not seeing coffee gross profit margin just from the beans being squeezed. But I think we're taking moderate price increase. We took a moderate price increase in March in, CBTL, in the U.S., and we still saw that our volume went up. So, yeah, we're not the biggest out there, so therefore, I think we're in a good space. What is... I guess the bigger question really is the, fast-growing value segment. So I'm talking about $1, $1.50, $2 U.S. for an Americano versus, let's say, $4-$5 U.S. for an Americano, such as Starbucks or, or us.
Those are the areas we're looking at to make sure we have a play, but not jeopardize our brand premiumness as well.
Got it. The other question that was asked quite often was on the other income. So we've seen a significant jump in other income in this quarter, specifically on the write-off of liabilities. How do you see this moving forward, and why did it go up in the first quarter?
Yeah. So, I think there was about a PHP 400 million swing-ish, thereabouts. So that, those are all the accruals reversing through. So I think a few years back, we had significantly higher reversals. We call them write-offs and liabilities, but the key component is really old accruals that were not tagged, so therefore have had to be reversed. Most of that's been cleaned up, so we're still seeing some of that coming in. But when I look at it, you know, versus where we were and where we're headed, I think it's reasonable amount. So, nothing really special there other than old A&P accruals, that in the past, we used to accrue based on a percentage, estimated percentage spend.
And because we are franchisees with A&P commitments in contracts with them, so, that worked when things were stable. But when things are less stable, then we have to start accruing in a slightly different way. So it's, I think, remnants of that coming through.
... And just on A&P, there's another question that are you expecting to ramp up on A&P in the coming quarters?
I'm laughing because we've had this conversation twice last December and the December year before. So it's not gonna be like December year before. So I'm happy to announce that we spent 2.8% A&P as a percentage of rev, which was exactly what we spent in Q1 of 2023. Now, I did also show a chart in the past that shows that Q4 typically is slightly higher. And the reason is 'cause there's a lot of catch-up of A&P in terms of suppliers invoicing us to make sure that they get paid, et cetera. So there's always been a 3.1%-3.3%-ish fourth quarter.
Barring that, and again, that to me is a trend, so barring that, no, the answer is, 2.8 in the first quarter is a good AMP spend.
All right. And, another question on financials is that there was a decline in cash provided by operating activities, which was driven by a change in net working capital. Can you provide some more color on that?
Yeah. The biggest impact, if you will, two biggest impact were some tax settlements. And again, this is not to say anything negative about the Bureau of BIR, but the reality and everyone knows who operates a business in Philippines, that that department has been significantly more aggressive in tax collections, tax assessments and tax collections, et cetera. And of course, that relates to settling that and all the sort of the halo effect of that. So, the major movement really was related to our payables and tax. But, it's not, how do I say? It's not a reflection of inefficiency in our FCP, sorry, FCF.
The reason is because we actually added percentages or favorable to F, sorry, FCF percentage from the main working capital component of inventory and AR. So I do see quite a bit of money flowing through there, and our CapEx has pretty much been managed to where it is. So, it's... In short, it's a different tax environment that we found ourselves.
Yeah. Then we have a few smaller questions. I'll just go through them quickly. The first one is, please tell us why Tim Ho Wan particularly underperformed in China, with same-store sales growth down 16%.
So, I think when Tim Ho Wan first took the brand position in China, coming off of the one Michelin star brand that it was, it took a positioning of a closer to fine dining, if you will, but I shouldn't say fine dining, but higher up in terms of QSR, fast casual, casual, so somewhere around casual to slightly above in Tier One cities, principally. And as I mentioned earlier, those food companies who are positioned in Tier One are getting hit the hardest. So more specifically... Sorry, in addition, I should, I should say, in addition to that, a lot of our restaurants were in malls. Mall traffic has significantly come down in Tier One cities. In addition to that, Monday to Thursday, average daily sales is very different than Friday, Saturday, Sunday in malls.
So those are the elements. So we're addressing that, so that there's three parts. I think there's repositioning and of course, there's eventual, if the stores are underperforming, we're okay. Again, it's not a significant part of our entire business. Good learnings, new brand, new market, good learnings, but the growth of Tim Ho Wan will take a different strategy in the future, and one that addresses the current environment in China. So, different tier cities, different channels, et cetera.
Got it. The next question is, is there any boycott impact in Malaysia due to the war in the Middle East?
Fingers crossed, and I shouldn't say it too loudly, but not for us. I know there's been significant impact on Starbucks in Indonesia and Malaysia and, of course, Middle East. Our Middle East CBTL business has grown significantly. Again, fingers crossed, but the answer is no, we haven't seen it in Malaysia. We're not in Indonesia, and we've seen upside in Middle East.
In fact, there is some, I would say, some market share gain because of the impact on Starbucks.
Yeah. Again, I never wish ill on anybody, including competitors, but, yeah, there has been, for us.
Got it. And then, you know, there's a question on guidance, and given that we're almost at the hour, maybe we can wrap it up with this question. Could you talk about the guidance in more detail in terms of store openings by country? Also, what are your plans for the international business expansion, not just in 2024, but for the next five years? And then there's a related question on same-store sales growth guidance, by country and brand, specifically for China, North America, and CBTL.
Okay. If it's okay, Divya, on that one, we'll publish it because... It will take me more than four minutes to go through all that. But our guidance, Cossette, keep me honest here, but I think it's around 700 stores, right?
Yes, sir. 700-750 stores.
And of that, about 150 is China. We always have the 80-20, so 20% will be Philippines, 80% will be international. But why don't we get back to you with detailed numbers on Highlands Coffee? That's a big one in terms of expansion. CBTL, China, and then the Jollibee brand. I think that's a important one also to show the split of new stores, but we'll come back on that. And what was the second part of the question?
Same-store sales growth guidance, specifically for China, North America, and CBTL?
Yeah. For the full year. I think North America, we're gonna exceed it, the general, group guidance number. I think China is gonna be a challenge. We'll continue to monitor it, but... So that one will be, a bit of a challenge, but our growth in the U.S. will more than offset that. CBTL, I think the back half of the year is gonna start to really look different versus the first three months of the year, 'cause we're already starting to see some difference in month number four and five. So, CBTL should be better, China will be softer, US will be better, EMEA will be better, and Philippines, they always deliver well, so.
Right. And since, before we wrap up, maybe one balance sheet question: What is the refinancing strategy for the upcoming step-up for perpetuals?
Yeah. Cossette, keep me honest, have we disclosed or announced on our preferreds yet?
Well, we've announced the Preferred Shares, sir.
Okay.
Yeah.
So, we have a PHP 3 billion-denominated preferreds. I think the coupon was around 4%. So that's coming due towards the latter, so towards Q4 of this year. We're well-entrenched in the process, so we're going to actually go for PHP 8 billion instead of the PHP 3 billion. So we'll use PHP 3 billion to refinance that, and the remaining PHP 5 billion will be for growth of CapEx support in the Philippines. And we'll leave a little bit for a buffer as well. We recognize that the rates will be higher. We recognize that, so we're working through some other instruments, the perps, and the seniors.
So we're working on that too, try to balance back down as well, because there's new tools out there, new options out there that we're exploring, that could actually give us better rates. So we're looking at that. So, Perps don't have to necessarily sit until they mature. We might have the ability to address some of that earlier. So this cash will go to very good usage.
Okay. There are a couple of questions that remain unanswered. I'll share them with Cossette, offline.
Okay.
Let me hand it back to Hazel just to close the call.
Thank you very much.
Thank you. Yep. So with that, we end the session on Jollibee Foods. We thank you, Richard and Cossette, for sharing your views. And as Divya has mentioned, had mentioned, if you have any additional questions, you can email us, and we can send it over to Cossette and Richard to answer. So to all the participants, thank you for joining us. If you, again, if you have further questions, let us know. Take care, and you may now disconnect.
Thank you.
Thank you. Have a good one.