KFC, Taco Bell Australian operator Collins Foods posts 500pc lift in profit despite KFC sales being down

Major Australian KFC and Taco Bell restaurant operator Collins Foods has delivered a five-fold lift in full-year profit amid higher demand for fast food in the face of cost-of-living pressures.

The company on Tuesday reported net profit for the year ended April 28 was up 502 per cent to $76.7 million. This reflected underlying performance as well as the $36.7m impairment of Taco Bell in the 2023 financial year, the resultant depreciation saving in FY24 ($3.3m) and $20.2m profit from the sale of Sizzler Asia.

Collins Foods delivered record full-year revenue of $1.5 billion, up 10.4 per cent on the prior year.

The positive results sent shares up 5.5 per cent to $9.83 at 10am.

Interim chief executive Kevin Perkins said the “solid” performance was even more impressive given the challenging macro-environment.

“While the (quick service restaurant) sector is one of the most resilient, it is not immune to the ongoing cost-of-living pressures facing consumers,” he said.

“As expected, trading conditions were softer in the second half given the dual impacts of inflation across all input lines and weaker consumer sentiment.”

KFC Europe — with 59 restaurants in the Netherlands and 16 in Germany — was the best performer for the group, posting a 26.1 per cent increase in revenue to $313.5m.

“Improved brand perceptions to record levels and our balanced approach to value have enabled us to gain share in this weaker consumer environment,” Mr Perkins said of the European operations.

“We’re also increasing brand relevance and appeal, introducing cult localised products and a permanent higher welfare chicken option to meet consumer expectations.

“Digital channels, led by in-store kiosk, remain key to growth in Europe, now accounting for almost 60 per cent of sales.”

Collins Foods said KFC Australia’s revenue grew 6.6 per cent over the prior year, benefiting from seven new restaurants and same-store sales growth of 3.8 per cent across its 279 restaurants.

“KFC Australia’s solid revenue growth and positive same-store sales in a deteriorating retail environment reinforces the resilience of this world-class brand, which remained the fastest growing QSR brand nationally in 2023 in terms of net new builds,” Mr Perkins said.

“We continue to prioritise long-term brand health, focusing on our value credentials and introducing new core menu enhancements and limited-time products to remain top-of-mind as consumers feel the pinch of higher interest rates and cost-of-living pressures.”

Taco Bell reported revenue for its 27 restaurants in Australia — including 14 in Queensland and 4 in WA — was up 11.7 per cent to $54.4m.

Collins Foods said sales in the first seven weeks of the new financial year reflected the continuation of a weaker consumer environment in Australia and Europe, as well as the lapping of strong growth in the prior year.

The conflict in the Middle East also continued to impact sales, particularly in the Netherlands.

Sales for KFC Australia were down 0.8 per cent, KFC Europe down 0.1 per cent and Taco Bell up 0.6 per cent in the first seven weeks.

“Significant cost-of-living and inflationary pressures are expected to remain for much of the year ahead, impacting sales growth and we expect margin pressure across the group,” Mr Perkins said.