Restaurant Brands sales increase 11%

Restaurant Brands has started the 2019 financial year in a strong way, reporting a rise in first-quarter sales of 11.7% on the previous period, driven by KFC New Zealand and Australia sales.

Forsyth Barr broker Suzanne Kinnaird said some minor upgrades had been made to her near-term KFC forecasts and she remained with a neutral rating.

KFC NZ first-quarter sales were $75million, up 5.8% on the previous corresponding period (pcp). Same-store sales growth was up 4.3%.

``Momentum remains strong in this business and this remains positive for conserving high margins. KFC is doing chicken right.''

Store numbers were steady in the quarter at 92, but two stores ahead of the pcp.

KFC Australia had strong sales growth of nearly 45%, reflecting the store acquisitions during the past 12 months, she said.

Also pleasing was the same-store sales growth of 4.2%, which was well ahead of Forsyth Barr's expected run rate for 2019 and stronger than the 2018 fourth-quarter growth rate, which disappointed at 2.4%. Margins had been more of a concern recently than the top-line growth.

Taco Bell, in Hawaii, reported steady same-store sales growth of 0.9%, although total sales were up 10% and boosted by an extra week's trading in the quarter.

Store numbers were unchanged in the quarter at 36 but one up on the pcp.

Pizza Hutt, also in Hawaii, also benefited from the extra week of sales.

The other New Zealand sales totalled $22.4million, just 12% of group sales. All three brands reported lower sales in the quarter versus the pcp.

Starbucks was the only chain to report same-store sales growth of 2.1%.

Carl's Jr remained weak, as expected, down 6.9%. Restaurant Brands was focusing more on margin recovery than the top line, Ms Kinnaird said.

Pizza Hutt was the negative surprise. Same-store sales were back 5%.

``Restaurant Brands is repositioning this business with increased franchise stores. The sales drop is not helpful given the significant margin pressure in 2018.''

Marketing, product innovation and promotional appeal were key to keeping the brands fresh and relevant to customers, she said.

It was important not to stand still in the quick services business.

There was a store rollout opportunity for KFC New Zealand of about 15 stores.

In Australia, expansion for KFC could come through store rollouts or bolt-on acquisitions.

Hawaii also presented opportunities but they would take time, Ms Kinnaird said.

Restaurant Brands' expansion into Australia and Hawaii through acquisition presented a new growth opportunity but also risks.

``We see Australia as a more natural fit and are more cautious on Hawaii.''

One of the key risks for the group was the increase in the minimum wage. Any increase could hurt profitability if the group could not offset the rise through price changes and/or menu mix.

Restaurant Brands had pricing power in its key KFC brand and labour productivity could offset cost pressure, she said.

Restaurant Brands last traded at $7.68, down 1.29%. The shares are up 26% on a 52-week basis.

Add a Comment

 

suv-updated-banner_1.jpg

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter