Daily ShareChat: Restaurant Brands

Restaurant Brands' refurbishment program at its KFC stores continues to deliver improved sales and profitability and there are encouraging signs the decline in Pizza Hut may be turning around, says Guy Hallwright at Forsyth Barr.

"Our forecasts are unchanged at this stage although if sales remain solid, there could be some upside risk," he says.

Restaurant Brands' first quarter sales rose 4.3% overall with KFC's sales up 6.5% and Pizza Hut's sales up 2.4% following a 4.8% sales decline in the fourth quarter of the previous year.

KFC's same-store sales growth was 8.3% for the quarter - three unprofitable stores were closed in the first quarter last year. "Same store sales growth has mostly fluctuated between 5% and 10% over the last three years," Hallwright says.

Pizza Hut's same-store sales growth was 5.2% in the quarter compared with a 1.2% decline in the fourth quarter of the previous year. "Menu changes and value-focused marketing strategies appear to have had a positive impact," he says.

"We are becoming more confident that Pizza Hut is finally turning around, albeit from a much reduced base, although margin improvement may be slower, given Restaurant Brands' value focus and ingredient cost inflation."

Restaurant Brands' shares still look cheap against his $1.37 valuation, Hallwright says.

BROKER CALL:  Forsyth Barr rate Restaurant Brands (NZX: RBD ) as accumulate.

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.