A growing number of Australians are opting for KFC over restaurant dining due to increased living expenses affecting their eating habits.
Collins Foods, Australia’s largest KFC franchise operator, saw a 6.6% rise in annual revenue across its expanding network of outlets. These strong financial results defy expectations of a slowdown in consumer spending.
Early trading on Tuesday saw an 8% increase in Collins Foods’ shares, reversing some of the losses incurred earlier this year amid predictions of reduced spending on fast food.
Kevin Perkins, interim CEO of Collins Foods, emphasized KFC’s value proposition, stating that consumers are feeling the impact of higher interest rates and living costs. This strategic focus on customer retention has proven successful, with KFC maintaining market share nationally and positioning for growth as economic conditions improve.
Although food sales at KFC Australia showed a slight decline on a same-store basis excluding new openings, they exceeded earlier forecasts that had contributed to a 25% drop in Collins Foods’ shares leading up to Tuesday’s results.
Collins Foods operates 279 KFC stores and 27 Taco Bell” data-wpil-keyword-link=”linked”>Taco Bell outlets in Australia, alongside its European operations.
The results highlight a trend of consumers trading down, favoring fast food over mid-tier restaurants, many of which have faced financial challenges. Morningstar notes that fast food chains are somewhat shielded from economic downturns as consumers opt for more affordable options like KFC and McDonald’s.
Collins Foods reported a significant fivefold increase in net profit to $76.7 million for the 12 months ending in April, driven by revenue growth across its domestic and international businesses.
While last year’s results were impacted by impairments in its Taco Bell business, KFC Australia’s performance remained strong with seven new store openings during the year. Taco Bell also experienced a revenue rebound, partly due to value-driven deals targeting cost-conscious customers.
The demand for Mexican-themed fast food is on the rise in Australia, evidenced by the success of competitors like Guzmany Gomez and Zambrero.
UBS analysts noted in an investor report that despite economic challenges, Collins Foods’ performance exceeded expectations.
Fast food chains continue to balance increasing menu prices with maintaining affordability for customers facing financial constraints.
The persistent rise in living expenses is reshaping Australians’ dietary choices, leading to concerns about public health.
Data from the Australian Bureau of Statistics indicates a decline in fruit, vegetable, and milk consumption, with many consumers opting for cheaper snacks and confectionery instead.