KEY POINTS:
Restaurant Brands is enjoying strong sales growth from the makeover of KFC stores while watching sales drop at Pizza Hut.
But company chairman Ted van Arkel said it does not have the capacity to speed up the rollout of new- look KFC outlets or pump cash in to
the ailing Pizza Hut brand.
Investors hope the success of the KFC makeover can be replicated at Pizza Hut as the fast-food firm faces life without the prospect of a private equity buyout.
But Van Arkel says that the quick fix, speeding up the makeover of KFC, was not an option due to the cost.
Sales results for the three months to May 21 show another strong quarter for the fried chicken chain due in part to growth at the 23 of its 87 branches that have been given makeovers.
Another four KFC outlets are expected to be revamped by the end of this year in a process that would take about five years to complete.
KFC sales are going up at a similar rate to Pizza Hut going down.
They were up 9.6 per cent with same store sales up 10.6 per cent for the same quarter last year.
That follows increases of 6.3 per cent for sales and 7.5 per cent for same store sales for the previous quarter to February 26.
Van Arkel said that margins had not suffered from spending to build up the brand and confirmed that KFC outlets given a makeover - costing $300,000 to $1.5 million - had increased sales more than those that did not.
The latest growth at KFC is despite three outlets in key locations - Papatoetoe in Auckland and Kent Tce and Kilbirnie in Wellington - were out of action during the refit.
Analyst Warren Doak of Macquarie Equities said strong results just part way through the makeover of stores were encouraging and it would be good if KFC results were repeated in the attempts to improve Pizza Hut.
Van Arkel said total sales for Pizza Hut New Zealand during the first quarter to May 21 were $17.4 million, a decrease of 9.1 per cent over the prior period, with same store sales down by 8 per cent.
Guy Hallwright of stockbroker Forsyth Barr said that all four quarters of last year were down so it would be hoped that the pizza chain had moved beyond that dip.
However, he noted that the first quarter loss of 9.1 per cent was down on a sales fall of 7 per cent for the first quarter of 2006, bringing the total to 16 per cent over two years.
"The second quarter last year was down 14 per cent so you would hope you would not see another fall on that scale for the second quarter this year," he said.
Van Arkel said the revamp of Pizza Hut was built on marketing and new menu items rather than store makeovers.
Restaurant Brands' third franchise - Starbucks Coffee - increased sales 7.9 per cent for the quarter compared to the previous year to $7.6 million, but same store growth was much lower, at 2 per cent.
FIRST QUARTER SALES
* Overall sales: up 4.1 per cent to $70.5 million.
* KFC: up 9.6 per cent to $45.5 million.
* Pizza Hut: down 9.1 per cent to $17.4 million.
* Starbucks: up 7.9 per cent to $7.5 million.