Australia | 11:22 AM
Collins Foods’ Australian business remains resilient while improving sales trends in Germany and the Netherlands are providing early evidence its challenged European operations may be turning a corner.
- Collins Foods’ AGM messaging points to improvement in Europe
- German trading improves as Bavaria acquisition adds scale
- Halal rollout offers another avenue for European growth
- Earnings forecasts increase post AGM
By Mark Woodruff
Morgan Stanley's economics team now expects the Reserve Bank of Australia to raise the cash rate by 0.25% to 4.60% in September and sees any subsequent easing occurring later than previously anticipated.
Higher interest rates are expected to place further pressure on housing, household cash flow and discretionary spending.
While the August reporting season results demonstrated consumer spending remained resilient, albeit increasingly selective, the broker expects the lagged effects of higher mortgage costs and housing weakness, along with softer volumes and rising costs, to weigh more heavily on earnings in the period ahead.
Against this backdrop, this week’s AGM trading update by quick service restaurant (QSR) operator Collins Foods ((CKF)) implied “sound” conditions for Australia continue with “improving” dynamics for Europe.
Opening its first KFC restaurant in Queensland in 1969, Collins Foods is an operator of QSR restaurants not only in Australia but also in Germany and the Netherlands. For the latter, Collins is the Corporate Franchise Partner, running KFC in the Netherlands on behalf of Yum! Brands.
The company’s website states: With KFC restaurant operations in Australia, Germany and the Netherlands, our vision is to be the World’s Top Restaurant Operator.
The company operates 298 restaurants in Australia, 25 in Germany and 62 in the Netherlands.
More on the trading update
The key Australia segment exhibited KFC same-store sales growth of 3.4% over the first 17 weeks of FY27, in line with consensus, despite moderating to 3.1% over the latest four weeks.
UBS notes the recent changes to trading hours may have raised expectations for an acceleration in Australian same-store sales growth, which has yet to materialise.
Ongoing challenging trading conditions in Europe are noted by Citi, particularly in Germany, which remains Collins Foods’ key growth market.
Morgan Stanley points to significant recent improvement in Germany, where same-store sales (SSS) improved from -7.2% over the first eight weeks to -0.1% over the latest four weeks, while total sales benefited strongly from a recent acquisition.
Completed on June 1, 2026, the acquisition comprised eight KFC restaurants in Bavaria, centred around Munich, from JJ Restaurant GmbH & Co. KG for approximately -EUR31.1m plus working capital.
UBS points out the eight stores delivered higher average store sales than the existing portfolio.
This broker suggests a return to sustainable SSS growth should improve the economics of new restaurant developments, allowing more projects to meet investment hurdles. This is expected to support an acceleration in store openings.
SSS growth in the Netherlands also turned positive at 3.1% over the latest four weeks, supported by the early success of Collins Foods’ Halal-certified range, Morgan Stanley notes.
The range has been launched in several of the company’s 62 Netherlands restaurants, with Morgans seeing scope for a broader rollout across the Netherlands and potentially into Germany, where Halal demand is significant.
Morgans views the initiative as a positive development for the underperforming Netherlands business.
While Citi sees potential for the successful Halal offering to be replicated in Germany, significant restaurant expansion in the Netherlands is seen as unlikely.
Management remains disciplined on new restaurant openings, with projects required to meet investment return hurdles before proceeding.
Morgans views this approach positively and expects a sustainable recovery in same-store sales, supported by Yum! Brands (the US-listed global fast-food company that owns the KFC brand) to improve new-store economics and allow network expansion to accelerate.
The priority in the Netherlands, suggests UBS, should remain network profitability.
According to this broker’s analysis, collective European SSS growth improved from -7.7% in the first eight weeks to -0.6% over the subsequent five weeks and 2.3% in the latest four weeks, well ahead of the -2.6% 1H27 consensus forecast.
The main growth drivers, apart from German stores
Morgans highlights several potential growth drivers for KFC Australia, including the national marketing launch of its new beverage platform, Kwench, ahead of summer, which could lift same-store sales through higher-margin drinks, desserts and additional food purchases.
Kwench is a line of KFC-branded, “innovative” cold drinks positioned as an add-on to the core fried chicken offering.
The late-night trading rollout is also nearing completion, the broker observes, providing exposure to a large and fast-growing quick-service restaurant daypart in which KFC has historically had limited presence.
Breakfast is also seen as a further opportunity, with trials commencing across 16 Gold Coast restaurants in September.
Meeting interim consensus?
UBS is particularly encouraged by the improvement in Europe, which had been a key concern behind its ratings downgrade to Neutral from Buy following Collins Foods’ FY26 result on June 30.
European trading is now tracking ahead of the rate required to meet both consensus and the broker’s 1H27 forecasts.
Australian trading remains solid, although UBS notes the recent 3.1% SSS growth has not accelerated despite changes to trading hours.
RBC Capital estimates Collins Foods needs same-store sales growth of around 3.4% for the remainder of 1H27 to meet the pre-update consensus forecast for the half.
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