Staff shortages and inflation take 86pc bite out of Restaurant Brands profit

Restaurant Brands posted a half-year profit of just $2.2m. Photo / Supplied, Montage

Inflation, ingredient and labour costs, and worker shortages hit fast-food retailer Restaurant Brands’ net profit, which fell 86 per cent in the last year with group net profit in the last six months of just $2.2 million - and price increases potentially on the way.

Chairman José Parés said profit was impacted significantly by added costs in the New Zealand arm of the business, including a minimum wage increase, high inflation and interest rates and rising ingredient costs.

Parés said labour market pressures meant the KFC, Taco Bell and Pizza Hut owner faced staff shortages, “requiring many stores across our network to reduce operating hours or operate with reduced capacity”.

He said the company added price increases to its strategy but increases should be in line with sales volumes, customer loyalty and relativity to competitors.

“The business has implemented a strategic programme of price increases and cost control measures to relieve margin pressures. However, we were not able to raise prices to fully offset the cost increases during the period without significantly impacting transaction volumes,” Parés said.

The company’s share price came in at $4.56 today, down $3.99 in the last 52 weeks.

The company’s half-year results to June 30 2023 showed net profit across its New Zealand, Australia, Hawaii and California operations fell 85.6 per cent from last June.

Earnings before interest, depreciation and amortisation (ebitda) were $78.3m, down 8.4 per cent.

Group sales hit a record high of $640.2m, up 9.4 per cent on last June due to a stronger US dollar and 10 new stores, but Parés said the company still faced inflationary pressures, especially with rising ingredient and wage costs.

“Performance in the first half of the year was impacted significantly due to continued input cost increases in the New Zealand business which exceeded earlier expectations of scope and quantum, lower than expected sales growth in California and Hawaii; and higher interest rates leading to increased funding costs,” Parés said.

Outlook

Parés said despite near-term inflationary impacts on performance, Restaurant Brands remains well-positioned to deliver on its strategy to provide continued long-term shareholder value.

“The board and management team are confident there are robust measures in place to achieve against guidance for the full year and rebuild performance to support the roadmap to sustainable growth.”

Acting chief executive Arif Khan said, “We continue to fine-tune operations across the business to ensure our systems and processes are fit for purpose to meet the challenges of the volatile economic environment and our growing store network.”

Khan said that included improvements to several internal systems to streamline and enhance end-to-end processes over contracting, procurement, pricing, hiring and inventory management, and improving margin controls.

He said the alignment of environmental, social, and corporate strategies continues to see increased efforts on general waste diversion, energy efficiency initiatives, and food waste reduction programs with a positive result.”

Investment into our digital platforms was planned to provide improved customer access and attract new customers, Khan added.

The company also planned “menu re-engineering” and enhanced marketing and promotions programmes.

Khan said the net profit for 2023 is expected to be in the range of $12 million to $16 million.

Alka Prasad is an Auckland-based business reporter covering small business and retail.