Collins Foods (ASX:CKF) Surges 11% on Germany Expansion: Time to Buy

Collins Foods is growing in Germany, but risks remain

Collins Foods (ASX: CKF) surged as high as 11% intraday on Thursday before closing up around 5.2% after signing a deal to acquire eight KFC restaurants in Bavaria, centred around Munich, for approximately A$50 million. The move increases its German store count by nearly 50% overnight. For investors who have watched the stock slide roughly 14% this month, the jump raises an obvious question: Is this the start of a genuine turnaround, or just a one-day bounce in a stock still looking for direction?

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The Germany Bet: Smart Move, Not a Silver Bullet

The Bavaria acquisition is a well-priced, strategic move. CEO Xavier Simonet confirmed the acquired stores run at higher margins than Collins Foods’ existing German restaurants, which means this deal should lift profitability from day one rather than being a speculative land grab.

What makes this more than just eight restaurants is what comes next. The deal unlocks a revised agreement with KFC parent Yum! Brands, with Collins Foods now targeting between 45 and 90 new KFC openings across Germany over the next four years. KFC already enjoys strong brand recognition in Germany but has roughly a fifth of McDonald’s store footprint there. That gap represents a real runway for growth, and we believe Collins Foods is well placed to close it.

That said, eight stores will not move the profit needle meaningfully on their own. The real test is whether management can execute the broader pipeline on time and on budget once the deal closes in May to June 2026.

The Domestic Recovery Is the Real Story

Investors focused only on Germany might be missing the more important shift happening closer to home. Collins Foods reported a strong first half of FY26, with revenue up 6.6% and underlying profit jumping close to 30% compared to the same period a year earlier. Australian same-store sales turned positive, and the company upgraded its full-year profit guidance to mid-to-high teens growth, up from its earlier and more cautious forecast.

This matters because FY25 was a difficult year. A large impairment of the Netherlands business and rising costs dragged statutory profit down sharply. The H1 FY26 results show that the underlying business is healing, not deteriorating. If the company can sustain this momentum into the second half, the FY26 full-year result due on 23 June 2026 should confirm the recovery is real.

The Investors’ Takeaway

Collins Foods is a recovery business, and that recovery is gaining real traction. The German expansion adds a credible long-term growth story on top of an improving Australian operation. Taco Bell’s planned exit also cleans up the portfolio and removes a distraction that management has been carrying for years.

At around A$9.92, analyst price targets suggest modest upside on the current consensus, with some bulls seeing the stock as high as A$11.66 if margins keep improving. That upside is real but not guaranteed.

In our view, existing holders should stay the course. For new investors, the better move is to wait for the full-year FY26 results in June. If the domestic recovery holds and Germany delivers early proof of concept, that could be the moment to buy with genuine conviction rather than chasing a one-day move.