Supersize on menu for Carl's Jr

Business Reporter·NZ Herald·

16 Apr, 2015 05:00 PM3 mins to read

Russel Creedy says the market could easily take 60 Carl's Jr stores as an initial target. Photo / NZME.

Restaurant Brands aims to more than treble the number of Carl's Jr stores in the next six years as a strong performance at KFC helped the company boost annual profit by 19 per cent.

New Zealand's largest fast food store operator, which also has Pizza Hut and Starbucks in its stable, posted net profit for the year ended March 2 of $23.8 million on the back of a 13 per cent rise in sales to $372.6 million.

Chief executive Russel Cready said there had been a solid performance across all divisions, particularly KFC.

The NZX-listed company bought the New Zealand rights to American fast-food brand Carl's Jr in 2011, opening its first store the following year.

It has since expanded to 18 stores in the North Island, netting $200,000 in earnings before interest, tax, depreciation and amortisation and a 40 per cent increase in sales to $20.1 million.

Creedy said sales at the burger chain would continue to grow as the company looked to expand the brand to an initial 60 stores in the next five or six years.

"It's [had] very rapid growth," Creedy said. "I think the market could easily take 60 stores, that's an initial target for me.

"If you look at competitors, they have around 80-plus stores - KFC has close to 100 and McDonald's around 160, so 60 is a pretty realistic first target," he said.

"There's some big territories that we haven't even touched yet so there's a lot of runway for us to expand into."

KFC was the major contributor to the result with ebitda growth of 14 per cent to $50.8 million and sales growth of 9.7 per cent to $265 million, which Creedy attributed to a popular overall menu and new innovative burgers.

He said the general move in the fast-food sector was towards individual meal combos but chicken in a bucket and on the bone was still KFC's biggest seller.

Salt Funds Management managing director Matthew Goodson said the solid result was roughly in line with market forecasts but outlook comments were better than expected.

"KFC continues to trade strongly," Goodson said. "The market had been concerned with Carl's Jr and while that's not out of the woods yet, I think they've committed to some pretty positive margin and sales numbers if they can get there. This management team also tends to under-promise and over-deliver." Creedy said Restaurant Brands did not operate zero hours staff contracts and did not need to, adding: "I don't think it works and quite frankly I think they're unfair."

Goodson said the company had worked hard to proactively deal with the issue and had never used zero hours contracts.

The company lifted its annual dividend 15.2 per cent to 19c per share, and said it was expecting to increase earnings again this year despite increasing labour costs. The company's shares closed up 2.45 per cent yesterday at $4.18.