Buying KFC owner Collins Foods shares? Here’s what’s happening in Germany

Collins Foods Ltd (ASX: CKF) shares are slipping today.

Shares in the S&P/ASX 300 Index (ASX: XKO) KFC fast food restaurant operator closed yesterday trading for $8.43. In early morning trade on Tuesday, shares are swapping hands for $8.36 apiece, down 0.8%.

For some context, the ASX 300 is down 0.7% at this same time.

Here’s what’s happening.

Collins Foods shares slip despite growth plans

Investors are running their slide rules over Collins Foods shares after the company announced that is has completed the acquisition of eight KFC restaurants, located in the German state of Bavaria.

Collins Foods acquired the eight fast food outlets from JJ Restaurant GmbH & Co.

The acquisitions form part of Collins Food’s growth plans in the nation, with Germany touted as its second core growth pillar. The new restaurants roughly double the company’s portfolio in Europe’s top economy.

Management noted the eight new restaurants “strengthen the company’s position in Germany and deliver a meaningful increase in scale in one of the country’s most populous and economically significant regions”.

Citing the ongoing potential benefits of the acquisition, Collins Foods noted:

In addition, the acquisition unlocks further development opportunities in Bavaria — an attractive and affluent market that includes Munich, one of Germany’s largest and wealthiest cities. Germany remains an underpenetrated and attractive market for the KFC brand, offering significant long-term growth potential.

The company first announced its agreement to purchase the eight KFC restaurants after market close on 11 March. It listed the purchase price as 31.1 million euros, plus working capital. And it anticipated revenues from the acquired restaurants of around $28.2 million euros.

Collins Foods shares closed up 5.2% on the news when markets opened the following day. That enthusiasm may have been driven by forecasts that the acquired restaurants will operate at higher margins than Collins Foods’ existing German restaurants.

Commenting on the completed deal today, Collins Foods managing director & CEO Xavier Simonet said:

This acquisition marks another important milestone in our German growth strategy. The additional scale created enhances our operational presence and positions us well to accelerate growth further in this key market.

The company said it will consolidate the contribution from the acquisition in its financial results from 1 June.

What is the ASX 300 fast food stock planning in Germany?

Collins Foods shares could have a sizeable growth path in Germany.

In March, the company revealed that it is targeting 45 to 90 new restaurants over four years.

“The KFC brand has substantial potential in Germany with approximately a fifth of the store footprint of the largest competitor, McDonald’s,” Simonet said on the day.

The post Buying KFC owner Collins Foods shares? Here’s what’s happening in Germany appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.