KFC operator Collins Food warns of lower margins, shares fall
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The news: KFC and Taco Bell operator Collins Food saw its share fall on the ASX after the company flagged that its margins are expected to contract in the first half of the 2025 financial year due to increased cost of sales, labour and energy.
The numbers: Collins Food shares fell 9.2% to $8.01 by 11:40am AEST.
In a trading update, the Queensland-based group said that the impact of persistent inflation on the cost of sales, labour and energy "more than offset" profit gains made in the first 16 weeks of the 2025.
As a result, Collins Food said first-half margins are expected to contract relative to FY24. Group underlying EBITDA margins are forecast to reduce in the range of 1.3% to 1.6% on last year's result of 15.8%, while underlying EBIT margins are due to decrease in the range of 1.5% to 1.8% on the 8.8% result recorded in FY24.
The context: The company said Australian KFC portfolio development remains "on track" with planned new restaurant additions in line with the previous financial year. The Europe portfolio will see an additional four to five company-owned restaurants added at the end of the 2024 calendar year, it noted.
What they said: "Current conditions remain challenging for consumers," Collins Food's interim CEO and managing director Kevin Perkins said. "This, and the impact of continued cost inflation, albeit moderating, will impact H1 margins".
"While timing is uncertain, Collins Food is well-positioned to take advantage of improved consumer conditions when they emerge," he said.
The source: ASX announcement
