Daily ShareChat: Restaurant Brands

By Jenny Ruth

Wednesday 10th June 2009

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.

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