KFC Australia has exceeded $1 billion in full-year sales for the first time as digital orders grow, although a decision not to fully pass on inflationary cost pressures to customers cut into its profit margin.
Collins Foods said on Tuesday revenue from its Australian KFC business grew 10 per cent to $1.05b for the 12 months to April 30.
Its earnings dipped 2.5 per cent to $206.6 million as its margin shrank to 19.2 per cent.
Significant cost increases included a 5.2 per cent hike in the minimum wage, while ingredients and energy prices also rose.
Managing director and CEO Drew O'Malley told analysts it made sense for the company's long-term brand health not to completely pass on these cost hikes to customers, as some other quick-serve restaurants had.
"We've prioritised customer value as our North Star in this difficult period," he said during a conference call.
"We understand that that the consumer is under a lot of pressure right now, especially with all the interest rate hikes that I've alluded to.
"No one takes margin more seriously than we do, but KFC's a value brand, and we're managing this brand for the long term."
The fried chicken chain appears to be growing market share, he said, with same-store sales rising 5.8 per cent and e-commerce orders now accounting for 24.3 per cent of all sales, up from 16.9 per cent the prior year.
KFC Australia, which had 272 restaurants at year-end, is now available on all digital delivery platforms following the addition of Uber Eats during the financial year.
But Taco Bell has continued to struggle with same-store sales dropping 4.8 per cent, on top of 8.1 per cent fall in 2021/22.
The company declared a $36.7m impairment on the business, which had an operating loss of $1.5m.
"New brands can take trends to take traction," Mr O'Malley said.
"We do believe there is a place in the Australia market for a value-centred QSR (quick-service restaurant) offering in the Mexican category."
It opened eight Taco Bell restaurants over the year and closed two, bringing its total count to 28 including 13 in Queensland, nine in Victoria and four in WA.
One more restaurant is expected to open in the Queensland suburb of Underwood in August before development pauses in August to focus on same-store sales growth.
Overall the company, which also has 72 KFC restaurants in Europe, grew revenue 14.2 per cent to $1.35b.
It posted a net profit after tax from continuing operations of $51.9m, down 12.1 per cent from last financial year.
Collins declared a final fully-franked dividend of 15 cents per share, bringing its total dividends for the year to 27 cents, the same as last year.
At 11.47am, Collins Foods shares were up 12.7 per cent to a one-month high of $8.86.
