KFC, Taco Bell, Pizza Hut operator Restaurant Brands posts record sales, but profit sliced almost in half

Restaurant Brands' share price has been weak, despite a strong earnings update. Graphic / NZME

Fast-food operator Restaurant Brands says sales hit a record high of $1.322 billion last year, but it still faces major cost pressures.

Restaurant Brands, which operates major fast-food franchises KFC, Pizza Hut, Carl’s Jr and Taco Bell, released its full-year financial results this morning.

Net profit after tax was down $15.8 million on the prior year at $16.3m.

The company said revenue growth was unable to compensate for inflationary pressures on ingredients and wages, and “underperformance” in California and New Zealand.

Outside New Zealand, Restaurant Brands operates a KFC franchise in New South Wales and California, and a Taco Bell and Pizza Hut franchise in Hawaii, Guam and Saipan in the Northern Mariana Islands.

“Same-store sales were also positive in all regions with the exception of California, where consumer spending continues to be adversely impacted by inflation.”

The company today said it was still facing cost pressures.

“The implementation of a strategic programme of price increases and cost-control measures delivered margin gains in the second half of FY23, and the group is starting to see steady signs of recovery in margins,” it said.

There will be no dividend paid right now.

“At present, directors have not deemed it appropriate to declare a dividend payment,” the company told the NZX.

Group store ebitda (earnings before interest, tax, depreciation and amortisation) was $178.4m, down 0.9 per cent on the previous year.

“All divisions experienced ingredient inflation and minimum-wage increases, with New Zealand stores impacted the most,” chairman Jose Pares said.

That placed big pressure on margins, especially in the first half of the year, he said.

Jarden analysts said Restaurant Brands had a slightly better-than-expected result in a tough year.

There was much evidence the company may have passed the trough but some regions were still underperforming, Jarden said.

“California remains the laggard and is also facing a significant 25 per cent lift in minimum wage requirements from April 2024.”

The state’s minimum wage is US$16 ($25.84) an hour but that will rise to US$20 ($32.30) an hour for fast-food restaurant employees on April 1.