Collins Foods Share Price Down, Farewells Sizzler Restaurants

Shares in Collins Foods Ltd [ASX:CKF] are down slightly today as the company announced it will close its remaining Sizzler restaurants permanently.

CKF, owner of KFC and Taco Bell, said the Sizzler business was the hardest hit by the COVID-19 lockdowns.

Despite the hampered growth from Sizzler, the Collins Foods share price had recovered nicely from the COVID-19-induced market crash in March.

At the time of writing, the CKF share price is down 3 cents, or 0.29%, to $10.37 per share.

Year-on-year, the share price has made a return of 4.33%.

ASX CKF share price - Collins Foods Shares ASX

Source: Tradingview.com

Collins Foods farewells an Aussie icon

In an announcement today, CKF said it will close the remaining nine Sizzler restaurants across Australia by November this year.

And yes, it was necessary for me to specify ‘Australia’.

CKF also holds the licence for the Sizzler brand in Asia — which will continue as usual.

Sizzler entered Australia in 1984, with CKF introducing the self-service concept that had gripped the US in the 1970s.

Though, Sizzler is still chugging along on the West Coast in the US.

CKF said Sizzler has been under constant review since 2015.

And that it was no longer considered to be core to the company’s strategic growth.

Sizzler revenues and earnings have been slow to recover from peak COVID-19 impacts, and the overall Sizzler business has continued to operate at a loss since the onset of the crisis.

Four Innovative Aussie Stocks that Could Shoot Up after Lockdown.

As part of the closures, approximately 600 staff will be forced out of a job.

Though CKF says many will be redeployed to their KFC or Taco Bell businesses.

What does this mean for Collins Foods’ bottom line?

In all fairness, I’m a bit surprised at the share price action today.

CKF had been flogging a dead horse (or soon to be dead) for a while.

In FY20, Sizzler Australia revenues accounted for less than 3% of CKF’s total revenue.

As of November, CKF could become a leaner business, able to invest more into their two other growing businesses.

CKF’s CEO Drew O’Malley said:

The ongoing impact of COVID-19 on revenues has meant that unfortunately, these restaurants have not established a clear path to profitability in the foreseeable future.

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.

Regards, 

Lachlann Tierney,
For Money Morning

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Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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