Daily ShareChat: Restaurant Brands

By Jenny Ruth

Thursday 17th March 2011

Restaurant Brands' fourth quarter KFC sales fell for the first quarter since the first quarter of 2006 and were softer than she anticipated, says Sarndra Urlich, an analyst at First NZ Capital.

KFC sales, which account for 73% of the company's total sales, fell 2.6% on a same-store (stores open a year or more) basis in the three months ended February 28.

The previous fourth quarter had shown 8% sales growth, making it particularly difficult to achieve growth in the latest fourth quarter and the company said it absorbed some of the October 2010 GST increase. It also blamed a continuing softness in retail spending and disruption to the business caused by its significant capital program of renewing its KFC stores.

"To be fair, there was always going to be a point at which KFC would struggle to keep cycling tough comps,” Urlich says. She expects it will be even more challenging for KFC to achieve sales growth in the current quarter because the year-earlier first-quarter sales rise was 11%.

"We would not be surprised if RBD prints another negative quarter," she says. "In light of the weaker-than-expected fourth quarter sales result and current trends, we believe it prudent to review our medium-term earnings estimates." Urlich has cut her forecast net profit for the year ended February to $24.8 million from $25.3 million previously and has cut her 2012 forecast by 4.5%.

Recommendation: Outperform.

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