Collins Foods soars as consumers say ‘KFC’

Shares in Collins Food, the owner of fast-food chains KFC, Taco Bell and Sizzler, rallied more than 18 per cent.

Australian KFC outlets actually maintained their growth trajectory to help cushion the blow to overall group revenue and profitability.

Shares in Collins Food, the owner of fast-food chains KFC, Taco Bell and Sizzler, rallied more than 18 per cent after its Australian fleet of KFC stores successfully pivoted to online and delivery food orders to bolster its earnings through the worst of the coronavirus pandemic.

Although its European restaurants were more severely hit by home isolation and community lockdowns in the first few months of calendar 2020, causing same store sales to decline, growth at Australian KFC outlets actually maintained their growth trajectory to help cushion the blow to overall group revenue and profitability.

Collins Foods on Tuesday reported that revenue rose 8.9 per cent to $981.7m for the full year to May 3, as net profit for the 53 weeks fell 20.1 per cent to $31.3m. The company declared a final dividend of 10.5c, flat against the final dividend in 2019, and payable on July 30.

Collins Foods chief executive Drew O’Malley said the resilience of the KFC brand in the midst of the health crisis helped the business react quickly and effectively to social distancing and other restrictions while also meeting the needs of customers. This was a tougher challenge in Europe where heavier regulations impacted sales.

“KFC Australia has once again shown that it is a safe and trusted brand that customers can rely on during uncertain times, allowing the business to quickly recover same store sales growth and continue its expansion into digital and delivery channels,’’ Mr O’Malley said.

“In Europe, sales were more severely impacted by COVID-19 restrictions, but we continue to experience a steady recovery. Taco Bell sales are also recovering close to pre COVID-19 levels, and home delivery in that brand has been launched ahead of schedule in 11 of the 12 restaurants.

For the year, which was 53 weeks against 52 weeks in 2019, KFC Australia same store sales grew by 3.5 per cent, against 3.7 per cent in 2019. Meanwhile KFC Europe same store sales fell 5.8 per cent, against a 3.7 per cent fall in 2019, due mainly to COVID-19.

Investors warmed to Collins Food’s upbeat performance during the health crisis, focusing on the Australian chains rather than the sales setbacks in Europe, and sent its shares up more than 18 per cent, making it the best performer in the S&P/ASX 200, before it closed up $1.06, or 12.68 per cent, at $9.42.

The company said effective cost control and same store sales growth resulted in KFC Australia’s underlying EBITDA increasing 10.6 per cent to $132.7m, on an improved EBITDA margin of 16.8 per cent.

Across Collins Foods’ KFC Australia network, 137 restaurants now offer delivery, and the channel continues to demonstrate strong growth, Collins Food said.

“Click and Collect” and website traffic continues to increase, combined with improved delivery and drive-through.

“Throughout this challenging time, Collins Foods maintained an operational priority on the highest standards of hygiene and safety to ensure the health and wellbeing of customers and employees. KFC was also able to quickly pivot toward takeaway channels such as drive-through and delivery, accelerating customer shifts into those channels and recapturing lost sales from the dine-in channels,’’ Mr O’Malley said.