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Collins Foods (ASX:CKF), who runs more than 350 KFC stores globally as well as Taco Bell Down Under, has been hit hard by worsening economic conditions – and newly reported profits problems are just the latest blow to its fast food empire.
The power behind KFC’s expansive Australian kingdom has seen consumers in droves now turning down Zinger Boxes and Family Feasts due to cost-of-living issues.
Those cautious consumers led to Collins’ first-half suffering a 52.1% profits dive.
In turn, the KFC and Taco Bell operator trimmed dividends, to 11.5cps.
Anyone whose been paying attention to the fast food titan – owned by Yum! in the U.S. – in recent years wouldn’t be too overly surprised to see FY25’s first-half not go perfectly for its ASX-listed operator; Collins has seen 29% shaved off its valuation year-to-date as it struggles to navigate Australian’s spending less.
In fact, anyone invested in Colllins would have seen a 39% loss through 2022 to 2024, an under-performance well below the market’s average through the same time.
With supermarket prices – as well as just about everything else – rising over the last three years, fast food companies have felt the squeeze. Collins sits among them, though it has managed to keep its EBITDA decline to just 7% in 1H25.
“I’m excited about the potential of our business moving forward,” Xavier Simonet, Collins managing director, adding both KFC and Taco Bell still boast “strong fundamentals.”
No one at Collins seems to be panicking yet either, despite the last three years.
Instead, the restaurant operator has doubled down on KFC expansion with six new stores in Australia. Twenty-two more have been renovated (with seven of those dubbed as “super-charged” makeovers, whatever that means).
The chicken giant is also trying to find space in the new low-spend economy with deals like the $9.95 Packed Lunch – an “accessible” meal it says is already a hit.
In a slightly similar vein, Taco Bell added a new cheaper beverages range.
CKF, which is a near-$1bn company, last traded at $8.45.
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