Tuesday, September 21, 2010

Restaurant Brands Ltd: KFC has finally cracked it

I haven't written much about Restaurant Brands Ltd [RBD.NZX] recently, it has been quietly going about its business with pretty much good results.

Their second quarter sales release prompted me however to come out and discuss some issues surrounding the fortunes of the company.

When I last discussed this company back in early June, I commented over the distortion of figures used by KFC management to report sales figures. They didn't include inflation as part of their calculation:

"The "record" $54 million of sales reported in today's result for KFC is only a record in terms of 2010 dollars. KFC are actually serving up less chicken to fewer customers.

Their best listed year was in 1997 where they did $172.3 million in KFC sales. That is because of accumulated inflation at a very conservative 3% annually over the last 13 years amounts to 39%.

Now lets assume conservatively that RBD sell $220 million of KFC for the full year 2010 and compare that figure to the 1997 record year.

39% inflation means in 2010 dollars RBD would have to sell $67.2 million more chicken just to match the record made in 1997.

$220 million is a fair way from the figure they need to make, of $239.5 million, just to match the 1997 record."

I have also wondered whether the increase in KFC sales was a sustainable one that had a long term take with KFC customers and it looks like given $72.8 million in sales for KFC in the latest quarter that if this growth continues the company could be looking at close to $300 million in total annual sales within the next year or so. This would easily beat the inflation adjusted $239.5 million that they needed to make to beat the record year for sales back in 1997.

I had my doubts but RBD CEO Russell Creedy looks like he has found the secret recipe for this company and its future and that recipe is clearly KFC.

Starbucks and Pizza Hut, the two other brands that the company manages, are still struggling and remain an unprofitable noose around the neck of the parent company.

The only answer for me is when will they be sold so they can allow the KFC brand to flourish even further without the distractions that two other brands bring to the parent company.

Restaurant Brands @ Share Investor

RBD - 2010 Quarter one sales
RBD - 2010 Quarter two sales

Restaurant Brands: KFC Sales Figures Explained - Part 2

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The secret recipe is out
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No reason for optimism in latest sales figures

Discuss RBD @ Share Investor Forum

c Share Investor 2010

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