KFC spoils share price fightback

By IRENE CHAPPLE

Restaurant Brands failed to boost its share price yesterday after revealing more disappointments with its main profit machine, fried chicken chain KFC.

Shares staggered then rose in later trading to close 2 cents down, or 1.6 per cent, to $1.23.

The first-quarter sales result had some good news - but it was overshadowed by the KFC's bad news.

Restaurant Brands chief executive Vicki Salmon said the result was disappointing: "I didn't expect the [share price] to go up."

Total sales for Restaurant Brands, which includes the KFC, Starbucks and Pizza Hut brands, reached $72.5 million, up 1.6 per cent on the same period the previous year.

It was dragged down by KFC, which clocked in at $40 million, suffering a same-store sales drop of 1.9 per cent. One KFC store had been closed over the quarter and total sales were down 2.1 per cent.

Salmon said there were two reasons for the drop in sales.

One was a change in holiday dates.

Easter and school holidays were combined and Anzac Day fell on a weekend.

"We didn't think it would affect us quite as badly," Salmon said.

The quarter also compared with one in 2003 when Mashies were being promoted: "That promotion gave KFC the highest volume sales week in Restaurant Brands' history so it was always going to be a hard week to follow." Current promotions such as Chicken Wedges and Tenderbake were expected to boost sales.

There was good news with Starbucks, which has struggled with negative sales over consecutive quarters.

It returned to same-store positive growth last quarter and showed further traction yesterday.

Same-store sales had grown 5.5 per cent with sales coming in at $5.6 million, up 5.2 per cent on the previous year.

Starbucks' store roll-out had slowed while it tried to cement its brand in the market but it now plans to have two or three more stores open in the next six months.

Pizza Hut New Zealand produced a 1.5 per cent increase in same-store sales to come in at $19.8 million.

Total sales were up 4.9 per cent in the same period on the back of promotions such as stuffed crusts and the gourmet chicken pizza range.

Pizza Hut Victoria unveiled same-store sales up 8.5 per cent for the quarter, with total sales coming in at $7.2 million, up 12.2 per cent on the previous year.

Salmon said margins for the loss-making Australian arm, which Restaurant Brands bought in 2002 and set about refurbishing, had fattened. Margins across the other brands were steady.

Restaurant Brands has been seen as a dividend stock and concerns about the company's growth prospects remain.

One analyst said Restaurant Brands faced a lot of financial pressures over the coming year with changes in holidays law and proposed changes to employment law which would make labour more expensive.

Salmon, appointed to the top job last year, said the company's underlying business had stabilised.

"We are feeling very confident.

"There have been management changes ... Everyone is much more focused and happier and doing thing simple things well."

Restaurant Brands

* First-quarter sales $72.5 million

* KFC $40 million

* Pizza Hut NZ $19.8 million

* Pizza Hut Victoria $7.2 million

* Starbucks Coffee$5.6 million