Collins Food (ASX:CKF): Why Colonel Sanders should stick to frying chickens in 2023

Marc Kennis Marc Kennis, November 29, 2022

Mixed picture at Collins Food

Collins Food (ASX:CKF) reported its 1HY23 results this morning and they showed a mixed picture. KFC same-store-sales (SSS) in Australia and Europe were up 5.1% and 10.4% respectively. But Taco Bell SSS declined 7.8%!

Overall revenues were up 15%, to $534m, but that includes sales from new store openings (open for less than a year). Underlying EBITDA was up marginally, to $95.4m. That difference in growth illustrates to issues that many Quick Service Restaurants (QSR), including Domino’s Pizza (ASX:DMP), are struggling with … high cost inflation!

 

No time to do stock research, but you still want to invest?
 
Stocks Down Under Concierge gives you timely BUY and SELL alerts on ASX-listed stocks!

 

GET A 3-MONTH FREE TRIAL TO CONCIERGE TODAY

 

 

Inflation is raging

Collins Food reported strong cost inflation in Europe for basically everything … ingredients, wages, utilities etc. In such an environment you can sell more buckets of chicken, but margins will suffer. And then there’s Taco Bell, the place to go to when you’re in the mood for Mexican food.

 

Stick to fried chickens

Well, Taco Bell disappointed on the sales front, that is, same-store-sales that were down. Overall sales were up 43% due to new store openings, bringing the total store count to 24 in Australia. But Taco Bell also closed stores due to underperformance and had to write off $11.9m in impairments. CKF said it has put the building of new Taco Bell restaurants on hold for a while.

So, instead of expanding into Mexican food, Colonel Sanders should probably stick to what he was good at … fried chicken!

 

Collins Food (ASX:CKF) price chart, log scale (Source: Tradingview)

 

The shares took a hit after the earnings release came out and are now trading just above $8, a level last seen in June 2022. If this level doesn’t hold, things may become worse for Collins Food shareholders, because the next support level from a technical point of view is far far away.

On the flip side, long term investors looking through the current inflation cycle can pick up CKF about 40% below the level it traded at just 12 months ago.

 

No time to do stock research, but you still want to invest?
 
Stocks Down Under Concierge gives you timely BUY and SELL alerts on ASX-listed stocks!

 

GET A 3-MONTH FREE TRIAL TO CONCIERGE TODAY

 

No credit card needed and the trial expires automatically.

 

 

Recent Posts

coal be phased out in Australia

When will coal be phased out in Australia? And what will this mean for ASX coal and energy stocks?

When will coal be phased out in Australia? It is inevitable that coal’s days are numbered, although the Russia-Ukraine war…

Woolworths shares

Here are 5 reasons why Woolworths shares aren’t as great an investment as you might think

Woolworths shares may at first glance appear to be one of the most risk-free investments on the ASX. It has…

Australian merger and acquisition laws

Australian merger and acquisition laws will be overhauled in 2026. Is this good or bad for ASX stocks?

Last week, the government introduced changes Australian merger and acquisition laws not seen in nearly 5 decades. The ACCC had…