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KFC owner Collins Foods shares sliding today on class action news

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Pieces of fried chicken.

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 $9.92. In morning trade on Friday, shares are changing hands for $9.87 apiece, down 0.5%.

For some context, the ASX 300 is down 0.4% at this same time.

This modest underperformance comes amid news that the company has agreed to settle a long-standing class action.

Here’s what we know.

Collins Foods shares slide on $9 million settlement

Collins Foods shares are in the red this morning after the KFC operator announced that it has entered into a binding heads of agreement with the applicants of the proceedings to settle the employee class action.

The legal action, which regards 10-minute employee rest breaks, was commenced against Collins Foods and other respondents in December 2023.

The company reported that it has agreed to pay up to $9 million to settle the matter, subject to approval by the Federal Court of Australia.

Collins Foods made no admission of liability.

What else has been happening with the ASX 300 fast food stock?

Yesterday was a big day for the KFC operator, with Collins Foods shares closing up 5.2%.

Investors responded favourably to the company’s announcement, released after market close on Wednesday, revealing its expansion plans in Germany.

Collins Foods said it has inked an agreement with JJ Restaurant to acquire eight KFC restaurants near Munich for approximately $50 million, plus working capital.

As for the return on that investment, management forecast around $46 million in revenue over the first full year of ownership. The company expects to deliver earnings before interest, taxes, depreciation and amortisation (EBITDA) of around $9 million over the first 12 months.

“There is a significant growth opportunity for Collins Foods in the German market, and we are pleased to be executing on our expansion in a disciplined manner,” Collins Foods CEO Xavier Simonet said.

Having secured an expansion of its German development agreements, the company is now aiming to open 45 to 90 new restaurants in the next four years.

Simonet noted:

The KFC brand has substantial potential in Germany with approximately a fifth of the store footprint of the largest competitor, McDonald’s. Despite lower restaurant density, KFC enjoys strong brand awareness and consumer appeal in Germany, supporting a compelling opportunity to expand our market presence.

How have Collins Foods shares been performing?

Collins Foods shares are up 19.8% over the past 12 months, outpacing the 11.1% gains delivered by the benchmark index.

The post KFC owner Collins Foods shares sliding today on class action news 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.

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