Collins Foods (ASX:CKF) share price edges higher on Sizzler update

The Collins Food Ltd (ASX: CKF) share price has inched higher today after the company provided an update on its Sizzler stores. At the time of writing, the Collins Food share price is up 0.77% to $10.46. This compares to the S&P/ASX 200 Index (ASX: XJO) which is down 0.48% to 5,852 points.

What does Collins Foods do?

Collins Foods operates dine-in and takeaway restaurant franchisees in Australia, the Netherlands, Germany and Asia. The group’s brands include KFC, Taco Bell and Sizzler.

Sizzler Australia

Earlier today, Collins Foods announced that it will close its nine remaining Sizzler restaurants in Australia by 15 November. The company said that its network chain of Sizzler has been under constant performance review since 2015. In addition, the group advised it no longer considered Sizzler Australia to be in its core brand portfolio.

Until the start of this year, trading continued in remaining stores with forward lease obligations and cash flow positive earnings. However, since COVID-19 impacted social norms, Sizzler has been slow to recover as compared to Collins Foods’ other brands. Revenue and earnings have effectively been performing at a loss since the onset of the pandemic.

The remaining restaurants are all company-owned leasehold sites, which are due for renewal over the next four months. Costs associated with lease breaks are expected to be minimal.

Collins Foods stated it will continue to licence the Sizzler brand in Asia, and does not see any forthcoming changes to those operations.

Commenting on the closure of the Sizzler Australia restaurants, CEO Drew O’Malley said it had been a difficult decision for the company. He said:

Closing restaurants is not something we do often and not a decision we take lightly, especially for a brand as beloved as Sizzler which has been such an important part of the Collins Foods’ history.

Furthermore, Mr O’Malley pointed to the slight impact on the group’s revenues for FY20 and beyond. He said:

In FY20, Sizzler Australia revenues accounted for less than 3 percent of Collins Foods’ total revenue. While the Sizzler Australia closure will allow us to minimise current-year and future losses, there will be some one-off closure costs that will be reflected in the upcoming half-year results.

Collins Foods share price summary

The Collins Foods share price performed strongly late last year before plummeting to a 52-week low of $3.50 in March. Since then, the Collins Food share price has recovered, sitting just below its 52-week high of $10.96. Collins Foods has a market capitalisation of $1.2 billion and a price-to-earnings (P/E) ratio of 39, indicating investor appetite for its shares.

More reading

• 2 strong ASX shares I’d buy today for growth and income
• ASX 200 down 0.9%: Tech shares push higher, gold miners sink, New Hope results
• Why Collins Foods, ResMed, Regional Express, & Xero shares are pushing higher
• 2 stellar mid cap ASX shares to buy in September

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Collins Foods (ASX:CKF) share price edges higher on Sizzler update appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/34f7vu4