How Will Collins Foods’ Bold KFC Expansion Shape Its Future Profitability?

A Transformative Year for Collins Foods

Collins Foods Limited (ASX – CKF) marked FY25 as a pivotal period under new leadership, with Managing Director and CEO Xavier Simonet steering the company towards a sharpened strategic focus. The company reported record group revenue exceeding $1.5 billion, underscoring the underlying strength of its business despite a challenging economic backdrop marked by cost inflation and subdued consumer sentiment.

Central to Collins Foods’ renewed strategy is the profitable expansion of its flagship KFC brand, particularly in Australia and Germany. The company is actively growing its Australian KFC footprint, supported by product innovation and operational enhancements, while Germany emerges as a key growth pillar with plans to open between 40 and 70 new restaurants over the next five years. This move leverages Germany’s large population and relatively low KFC market penetration, presenting a compelling opportunity for scale and profitability.

Strategic Portfolio Shifts and Leadership Changes

In a decisive portfolio realignment, Collins Foods has exited the Taco Bell business to concentrate resources on its core KFC operations. This strategic divestment aligns with the company’s disciplined capital allocation framework aimed at maximizing shareholder value.

Leadership transitions have also been a feature of FY25, with Xavier Simonet’s appointment in November bringing a wealth of global executive experience. The company has further strengthened its operational leadership by promoting Krystal Zugno to lead KFC Australia and appointing Chris Johnson as General Manager Europe, signaling a clear commitment to operational excellence across key markets.

Financial Performance and Challenges

While group revenue hit a record high, underlying net profit after tax (NPAT) declined to $51.1 million, down nearly 15% year-on-year. This was partly due to a $35 million non-cash impairment charge related to 16 KFC restaurants in the Netherlands, reflecting ongoing cost-of-living pressures and significant labor inflation in that market. Additional smaller impairments and a $3.2 million provision top-up for potential wage underpayments also weighed on statutory profits.

Despite these headwinds, the company’s balance sheet remains robust, enabling continued investment in network expansion and technology upgrades. Digital sales growth in Australia, which now accounts for over a third of revenue, highlights Collins Foods’ successful adaptation to evolving consumer preferences.

Outlook and Market Positioning

Collins Foods enters FY26 with momentum, reporting a 6.7% increase in total company sales in the first 18 weeks, driven by same-store sales growth across Australia, the Netherlands, and Germany. The company reiterates its target for low to mid-teens percentage growth in underlying NPAT, contingent on continued execution of its strategic priorities.

Operational focus remains on driving customer engagement, improving labor productivity, and managing costs to enhance margins. The company’s sustainability initiatives also reflect a broader commitment to responsible business practices, which it views as integral to long-term brand trust and shareholder value.