Taco Bell troubles offset KFC boost for fast food operator

The boss of KFC, operator Collins Foods, still believes that the company’s quick-service Mexican food business Taco Bell can succeed in the Australian market despite the brand’s results hitting the group’s full-year profits.

Revenues at Collins Foods were up 14.2 per cent to $1.3 billion in the 12 months to April 30. KFC stores hit $1 billion in revenues for the first time, but the company’s net profit declined by 76.7 per cent to $12.7 million.

A $36.7 million impairment against the Taco Bell business impacted the results, with Taco Bell stores posting a same-store sales decline of 4.8 per cent for the year.

Collins Foods shares surged 13 per cent to $8.87 despite the drop in net profit for the year, with analysts saying the strength of KFC sales was impressive and the outlook for the group’s brands was positive.

Australia’s quick-service Mexican food market has become increasingly crowded over the past few years, with brands like Guzman y Gomez growing strongly, but Collins Foods chief executive Drew O’Malley said there was still a place for Taco Bell in the Australian market.

Loading

“New brands can take time to gain traction. We have seen similar trends in other markets in the early years, where the brand [Taco Bell] is now thriving today,” he said.

But the company acknowledges that it has had to invest in “enhancements to product quality” to bring more Australian consumers into Taco Bell stores.

O’Malley said one key area of recent investment been in the quality of the brand’s chips.