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Restaurant Brands 2Q sales rise 5.8%, boosted by KFC promotions, Carl's Jr expansion

Wednesday 17th September 2014

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Restaurant Brands New Zealand, the nation's largest fast-food operator, increased second quarter revenue 5.8 percent as it benefited from increased sales at its largest KFC fried chicken chain and ramped up expansion at its newest Carl's Jr burger chain.

Sales rose to $108 million in the 16 weeks ended Sept. 8, from $102 million in the year earlier quarter, the Auckland-based company said in a statement. Same-store sales, which excludes the impact of store openings or closures, gained 5.3 percent to $103.9 million.

Restaurant Brands is tweaking its store mix in an effort to boost earnings. The company is selling its regional and lower volume Pizza Hut stores to independent franchisees, has closed unprofitable Starbucks Coffee outlets and has added burger chain Carl’s Jr to better compete with rivals McDonald’s Restaurants (NZ) and Burger King Corp. In the coming year it plans to pick up the pace of store upgrades at its main KFC fried chicken chain, as it targets a complete revamp of the network in the next two years.

In the latest quarter, sales at the company's 90 KFC stores rose 6.7 percent to $80.2 million, ahead of the 2.4 percent pace the year earlier. Same-store sales rose 7.4 percent to $78.6 million.

"The strong sales increase continued to be driven by the new menu, in particular around family meals launched late last year," the company said. "Strong promotions in the quarter were the return of the 'Double Down' including two new variants and the very popular 'Hot ‘n Spicy' campaign."

At its Pizza Hut unit, second-quarter sales slipped 0.8 percent to $15.2 million from the year earlier period as the company exited three stores, taking the total in the chain to 49, in line with its strategy to sell regional and lower volume stores to independent franchisees.

Still, same-store sales at Pizza Hut jumped 7.6 percent to $15.1 million as the chain benefited from the continuation of its 'value' offer and successful promotions in the quarter including free 'Stuffed Crust' with a 'Meat Lovers' pizza purchase.

Meantime, the Starbucks Coffee unit increased sales 1.8 percent to $7.5 million in the quarter even though it had two fewer stores than the year earlier period, with a total of 26 outlets. Same-store sales gained 4.7 percent to $7.5 million as the coffee chain benefited from its improved value and customer experience offering initiatives implemented over the past two years.

Sales at the Carl's Jr burger chain surged 20 percent to $5.2 million as it benefited from the opening of four new stores, taking the total to nine. Same-store sales dropped 38 percent to $2.7 million, reflecting a comparison with strong store openings in the year earlier period, the company said.

Restaurant Brands said it plans to open two more Carl's Jr stores this financial year.

Shares in Restaurant Brands rose 1.5 percent to $3.40 and have gained 19 percent so far this year, outpacing the NZX All Index's 6.1 percent rise. The stock is rated an average 'hold' according to analyst estimates compiled by Reuters.


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