Collins Foods Earnings: Short-Term Pain for Long-Term Gain

There are encouraging signs in no-moat Collins Foods’ fiscal-year 2024 result, but the KFC and Taco Bell franchisee is under cyclical pressure. The EBITDA margin for the core KFC Australia business, accounting for roughly 80% of operating earnings, lifted 60 basis points on fiscal 2023 to 15.6%. This was ahead of our forecast for flat margins, suggesting Collins is passing on some prior cost inflation through price rises. But group sales disappointed, rising 10% against our 13% forecast. The net effect was a 15% improvement in underlying EPS, to AUD 0.51, missing our AUD 0.55 estimate.