Pizza Hut tipped to gain in 'shakeout'

GEOFF DALE/Sunday Star-Times

PIZZA SLICE: Restaurant Brands chief executive Russel Creedy said Pizza Hut's result was disappointing "in a very competitive market".

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Another flagging performance from Pizza Hut dragged fast-food operator Restaurant Brands’ total store sales down 0.9 per cent in its first quarter to May 19, but the company says the current economic downturn will have significant benefits for Pizza Hut.

The company, which also holds the KFC and Starbucks brands in New Zealand, said Pizza Hut recorded a "disappointing" 13 per cent fall in total sales to $15.1 million, mainly because of the closure of seven of its full pizza restaurants.

Pizza Hut’s same-store sales for the quarter were 7.1 per cent lower. Restaurant Brands chief executive Russel Creedy said the tough economic environment was beginning to reveal a silver lining for Pizza Hut.

The retail pizza market was undergoing a "shakeout", with some Pizza Hut competitors closing, particularly in Auckland and Christchurch.

Restaurant Brands’ total sales of $69.8 million were also hit by the overall contraction in retail spending and the timing of the Easter and school holidays.

Forsyth Barr analyst Guy Hallwright said the results were not unexpected, given the retail slowdown. Pizza Hut had faced aggressive expansion from Hell Pizza and Domino’s Pizza, he said.

KFC and Starbucks’ performances were respectable and he predicted Restaurant Brands would weather the economic downturn.

Takeaway food had taken less of a beating than many other retail categories this year, he said.

‘‘[Restaurant Brands] will probably have a good chance of equalling or even beating last year’s profit, and this could be a year where not too many retailers do that,’’ Mr Hallwright said.

Last financial year, after one-off items, the company’s bottom-line profit was $9 million, a considerable improvement on the previous year, when write-downs led to an all-up loss of $3.5 million.

For the first quarter, KFC — which contributes about two-thirds of Restaurant Brands’ total sales — turned over $47 million, up 3.4 per cent on the 2006-2007 quarter.

On a same-store basis, the increase was 2.1 per cent. Mr Hallwright said KFC growth had slowed, but this was expected after strong growth in previous quarters.

Starbucks, which has had 18 consecutive quarters of growth, increased its sales 1.4 per cent to $7.7 million. Same-store sales were up 6.7 per cent, after the closure of two stores.

- © Fairfax NZ News