Australians are increasingly eschewing restaurant dining in favour of fried chicken in a bucket as the cost of living changes eating habits.
Collins Foods, the largest KFC franchisee in Australia, recorded a 6.6% lift in full-year revenue at its expanding network of outlets, representing a resilient set of full-year financial results that have defied an anticipated slowdown.
Shares lifted by 8% in early trading on Tuesday, reversing some of the losses suffered this year amid gloomy predictions that Australians would significantly cut their spending on fast food.
The Collins Foods interim chief executive, Kevin Perkins, said KFC Australia was focusing on its value credentials as “consumers feel the pinch of higher interest rates and cost-of-living pressures”.
“This consistent approach to customer retention has proven successful, evidenced by KFC retaining share nationally, ensuring we are well placed for growth as economic conditions improve,” Perkins said.
While food sales were slightly down at KFC Australia on a same-store sales comparison that ignores new store openings, the results were still well above the dour forecasts that have sent shares in Collins Foods down 25% this calendar year leading up to Tuesday’s results.
Collins Foods operates 279 KFC stores and 27 Taco Bell outlets in Australia. It also has European operations.
The results show that a “trading down” trend has taken hold, with fast food outlets taking business from mid-tier restaurants, which have been going bankrupt in large numbers.
Morningstar has noted that fast food restaurants were partially protected from an economic downturn because consumers were expected to “trade a $25 steak night for a cheaper option offered by a quick service restaurant like KFC or McDonald’s”.
Collins Foods reported a fivefold increase in net profit to $76.7m in the 12 months to the end of April, backed by a revenue jump across its local and overseas business units.
Last year’s results were also weighed down by large impairments booked on the company’s Taco Bell business.
Its main money spinner, KFC Australia, opened seven new stores (net) during the year, while revenue at Taco Bell rebounded, backed in part by $5 and $10 burrito deals aimed at value-conscious customers.
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Mexican-themed fast food is now in demand in Australia, with Taco Bell rivals Guzman y Gomez and Zambrero also reporting strong sales.
UBS analysts said in an investor note on Tuesday that while economic conditions were challenging, performance at Collins Foods was proving better than expected.
Fast food stores have been treading a fine line between increasing menu prices to retain profit margins and trying not to put off cash-strapped customers.
A relentless rise in living costs is dramatically changing what Australians are eating, raising concerns over the nation’s health.
Data from the Australian Bureau of Statistics shows that Australians are buying less fruit and vegetables and consuming less milk.
Many consumers, however, are forgoing fresh produce to load their diets with cheap confectionery and other snacks, which have spiked in popularity in recent years, according to the ABS.
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