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Taco Bell owner to expand after solid first half

Marion – Circa January 2018: Taco Bell Retail Fast Food Location. Taco Bell is a Subsidiary of Yum! Brands

Fast food retailer Restaurant Brands announced it will open seven Taco Bell stores in Australia and six in New Zealand this year, making progress on its plan to have 60 stores in ANZ by 2024.

The company said initial sales in its Taco Bell business in Australia and New Zealand exceeded expectations.

Australia welcomed its first two Taco Bell stores in December 2019, in Jesmond and Blacktown in New South Wales, and had initial sales of $600,000, exceeding expectations, according to the company.

Initial set up costs, however, resulted in an earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $700,000 in the first half.

Restaurant Brands opened its first Taco Bell store in New Zealand in New Lynn Mall, Auckland, and posted sales of over NZ$150,000 in its first week of operation and delivered over NZ$700,000 in sales in its first two months of trading.

The business, however, incurred a small loss of NZ$300,000 million for the year due to establishment costs.

The company is expected to open its next Taco Bell store in New Zealand in Shortland Street in the first quarter of 2020 with five further stores forecast to be opened during the year.  

The fast food chain posted total sales of NZ$705.5 million (A$677.10 million) for the 44 weeks for the December 2019 period, down from the previously reported 52 weeks to February 2019 period.

“Following the announcement of a change in balance date for the company in October 2019, the trading results for the December 2019 period are for only 44 weeks (10 months) vs 52 weeks (12 months) for the February 2019 period previously reported,” the company said.

On an equivalent 12-month basis, sales were up over 5 per cent.

Reported net profit after tax of $30.1 million for the 10 month period was adversely impacted by the shorter reporting period and the adoption of NZ IFRS 16.

Restaurant Brands said combined store EBITDA (pre-NZ IFRS 16) for the 10 months was $116.0 million, down 10.3 per cent on the previous 12-month period; however on an equivalent 12-month basis, EBITDA is up over 6 per cent at $137.1 million.

According to the company, when excluding the negative impact of NZ IFRS 16 leases, the shorter accounting period and (for the previous year) the impact of some significant one-off costs, the normalised NPAT was $45.7 million, up 8.3 per cent on the prior year equivalent.

“This was primarily driven through the aggressive capital investment programme and continued positive trading momentum across the key brands,” the company stated.

The company added that the introduction of Taco Bell in New Zealand and New South Wales had a minimal impact on this year’s results.

New Zealand operating revenue for the 44 weeks ending December 31 was $395.5 million, down $56.3 million on the 52 week FY February 2019 year, including a $16.0 million reduction in sales due to the disposal of the Starbucks Coffee business during the prior year.

Total store sales were $367.5 million, down $52.2 million on last year. However, when normalised for 12 months, New Zealand sales were up 3.5 per cent and same store sales were strongly up 5.0 per cent.

KFC New Zealand continues to underpin the overall performance of the New Zealand operations. Although reported sales were down 8.4 per cent to $308.4 million due to the 44 week reporting year, same-store sales were up 5.2 per cent and total full year equivalent sales up 8.3 per cent.

The Australian business (operating the KFC and Taco Bell brands) contributed a total sales of NZ$169.1 million (A$162.29 million), store EBITDA of NZ$25.2 million and EBIT of NZ$8.6 million. On an annualised basis both sales and store EBITDA are well up on the prior year.

Store EBITDA was impacted by costs of NZ$700,000 relating to the initial launch of the first two Taco Bell stores in December 2019.

Total sales for the KFC business in Australia were A$159.6 million, a 10.5 per cent decrease to A$18.7 million on last year due to the reduced reporting period. Same store sales continue to remain strong, up 5.1 per cent on last year. On a full year equivalent basis sales were up 5.8 per cent to A$10.3 million.

The company said it is not anticipating any significant change in the economic and competitive environment or unusual costs in the 2020 financial year although it stated the conditional acquisition of 59 KFC and 11 joint KFC/Taco Bell stores in California will have a considerable impact on the balance sheet and earnings profile once completed.

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