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Collins Foods Limited (ASX: CKF)
Collins Food Limited (Collins Food) is a KFC franchisee in Australia and Europe, a Taco Bell franchisee in Australia as well as the owner of Sizzler restaurants in Australia and the franchisor for Sizzler in Asia. Collins Food has a market capitalisation of A$846 million.
What has happened to Collins Food’s operations recently?
Collins Food announced (18 March 2020) that Australian KFC stores will only be operating the drive-through service at KFC stores. KFC Australia drive through accounts for approximately 80% of sales, which is positive news for Collins Food as most of their sales should continue, given that all stores do not have to be closed in the short-term. Over the last five-week period (ending 5 May), same store sales (SSS) were down marginally down 0.9% versus the prior year.
In Germany, the Company’s KFC restaurants continue to trade through take-away, drive-through and delivery channels whilst certain Government restrictions have reduced the dine-in sales. SSS for the last five-week period (ending 5 May) was down 28%.
In the Netherlands, while still allowing take-away, drive-through and delivery, the Government has banned dine-in transactions. SSS for the last five-week period (ending 5 May) was down 40%.
Collins Food also announced recently that sales growth in the first 20-weeks of HY20 in KFC Australia, KFC Germany and KFC in the Netherlands is 3.5%, 5.6% and -3.6% respectively.
What is the outlook for Collins Food?
The long-term outlook for Collins Food is positive with several new stores from KFC and Taco Bell opening around Australia and Europe. However, it is important to note that discretionary spending on fast food is depend on income generation of economic agents. If wage growth continues to be stagnated, and domestic economic conditions in Australia and Europe continue to weaken, this could limit the ability for consumers to purchase this type of food, as it is not a necessity and as cheap as other food sources. Nevertheless, the long-term outlook is positive.
Dominos Ltd (ASX: DMP)
Domino’s Pizza Enterprises Ltd (Dominos) is an Australian-owned master franchise holder for Domino’s in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg and Denmark. Domino’s has a market capitalisation of A$5.5 billion.
What has happened to Dominos operations recently?
Dominos announced (19 March 2020) a voluntarily closure of all stores in France for a 15-day period due to the growing concerns surrounding the spread of COVID-19 in France. In addition, Dominos announced (25 March 2020) stores in New Zealand have been closed for a 4-week period. This is due to the New Zealand Government announcing that all food delivery and takeaway will be prohibited. Dominos other markets remain open, with a focus on delivery services to consumers.
What is the outlook for Dominos?
The outlook for Domino’s is positive. Domino’s has opened another 11 stores in the first weeks of the next half year with significant store openings planned in the later parts of the half year that should continue Domino’s expansion in domestic and global markets.
Investors that want exposer to the fast food industry could consider Collins Food and Dominos, as both these companies have sound long-term growth prospects.
Disclaimer:
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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ASR has no position in any of the stocks mentioned.
