Can Jumbo survive in China’s crowded foodservice market?
Operating leverage will be a key factor.
Jumbo has successfully captured China’s palate, as the company’s profitability will blaze past industry peers’ thanks to successful China operations.
According to a report by Maybank Kim Eng, Jumbo’s branding and identity helps the restaurant stand out in crowded markets especially when expanding overseas. Iconic dishes, footprint of outlets in ideal locations, effective front- and back-end operations provide Jumbo high defensible margins.
Moreover, Jumbo’s performance China is expected to benefit from operating leverage, with estimates putting the operating leverage of Jumbo’s IAPM outlet around 3.3x.
“As sales ramp up, the high operating leverage will lead to rising profits for every incremental dollar of sales. This means Jumbo’s potential to outperform is very high,” asserts the report.
