Restaurant Brands Sales Increase of 2.5% in 3rd Q

14 October 2005
News release

Restaurant Brands Reports Sales Increase of 2.5% for Third Quarter

Restaurant Brands New Zealand Limited today announced a strong third quarter sales result, driven by ongoing success at its KFC and Starbucks Coffee businesses.

Chief Executive Vicki Salmon said total sales increased 2.5% to $71.8 million during the 12-week period ended 5 December 2005.

“The continuing performance at KFC and Starbucks Coffee was pleasing to see especially given the overall slowdown in retail sales. However this was offset by disappointing results at our Pizza Hut businesses in New Zealand and Australia, particularly on a same store basis, which have been impacted by a number of factors including increasing competition in both markets and the unseasonably warm weather when compared with last year.”

“We anticipate the current trends to continue for the remainder of our financial year and that improved sales and earnings at Starbucks Coffee and KFC will be offset by lower margins at Pizza Hut. Despite increasing costs pressures on the business, especially in the areas of labour, freight, distribution and cheese, we expect to report a full year profit result close to the prior year.”

Brand Performance
// KFC // PHNZ // STARBUCKS // TOTAL NZ CONCEPTS // PHV
THIRD QUARTER // Current / Last Year // Current / Last Year // Current / Last Year // Current / Last Year // Current / Last Year
Total Sales ($m) // 39.2 / 38.3 // 20.4 / 19.9 // 6.4 / 5.5 // 66.0 / 63.7 // 5.8 / 6.4
Same store sales (%) // 2.6 / // (3.9) / // 3.4 / // 0.6 / // (5.7) /
YEAR TO DATE
Total Sales ($m) // 130.0 / 130.6 // 70.3 / 66.3 // 20.7 / 18.3 // 221.0 / 215.2 // 21.4 / 22.6
Same store sales (%) // 0.9 / // (1.2) / // 2.5 / // 0.4 / // (2.2) /
Store numbers // 87 / 87 // 105 / 100 // 42 / 37 // 234 / 224 // 50 / 51

KFC

“We are extremely pleased with the ongoing performance at all 87 KFC stores, and in particular those that have gone through the store transformation programme.”

“As this is our largest brand, contributing 55% of total sales in the third quarter, the ongoing improvement in this business will have significant impact on our overall financial performance over the long term.”

Salmon said all six transformed stores continue to deliver sales growth on the prior year, with a flow-on effect to other KFC stores contributing to the 2.6% increase in same store sales across the division. A new regional store was opened in Taihape during the quarter, the first new KFC store to open in two years.

A seventh transformed store opened in New Lynn, Auckland earlier this month. A second new store opened in Kaikohe, Northland early in the fourth quarter.

During the quarter, KFC updated its burger range launching the Original Fillet and Zinger BBQ Bacon Burger to positive customer reviews.

“We remain committed to updating our menu offerings at KFC and are trialing an extensive new menu in New Lynn, featuring a range of grilled chicken options as well as delicious new Sarah Lee desserts.”

Pizza Hut New Zealand

“Total sales at Pizza Hut New Zealand increased 2.7% during the quarter on the back of new store development; however same store sales declined a disappointing 3.9%.

“A number of factors contributed to this result, including increasing competitor activity, the impact of new store development on existing stores, softer retail spending and unseasonably warm weather when compared with the prior year.”

Two new stores opened during the quarter in Kerikeri and Dannemora, Auckland.

“We plan to open a further two stores before the end of our financial year.”

Salmon said a repeat of the Big Dippers promotion from earlier in the year failed to generate the same level of sales during the third quarter.

“We remain pleased with the early results from the refurbished dine-in restaurant in New Lynn which re-opened in June.”

Starbucks Coffee

“Starbucks Coffee delivered another star performance with the eighth consecutive quarter of same store sales growth.”

During the quarter new stores opened in Nelson and Westgate Auckland, with a further store opening in Lower Hutt early in the fourth quarter. One more store is expected to be opened before year end.

Pizza Hut Victoria

“We continue to be disappointed by the performance at Pizza Hut Victoria and are pursuing opportunities to re-franchise certain stores as part of our previously announced rationalisation programme. It is anticipated that this process will be completed for the first stores in the first quarter next year.”

ENDS

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