Australia's Collins Foods surges on resilient FY earnings, positive outlook

Collins Foods Ltd (ASX:CKF) shares surged over 20% to a near one-year high after the fast-food operator reported a 2.1% revenue increase to A$1.52 billion for the year ended April 27, and provided optimistic forward guidance. Despite a 14.8% decline in underlying net profit, investor confidence was boosted by improving second-half same-store sales, easing input costs, and early FY26 trading showing 4.9% KFC Australia sales growth, with group NPAT projected to grow in the low to mid-teens percentage range. The company also confirmed its strategic shift to exit Taco Bell and prioritize KFC expansion in Germany.

Analysis

Collins Foods Ltd. (ASX:CKF) experienced a significant share price surge, climbing over 20% to a near one-year high, as the market responded favorably to strong forward-looking guidance that overshadowed a mixed full-year result. For the year ended April 27, the company reported record revenue from continuing operations of A$1.52 billion, a 2.1% increase driven by its core KFC Australia division. This top-line growth, however, did not translate to the bottom line, as underlying net profit after tax (NPAT) fell 14.8% to A$51.1 million due to elevated depreciation and cost pressures in the first half. The negative profit figure was largely disregarded by investors in favor of signs of a positive inflection point, including improving same-store sales growth in the second half aided by easing input cost inflation. Crucially, the company's FY26 outlook projects a significant rebound, with group NPAT forecast to grow in the low to mid-teens percentage range, supported by early-year KFC Australia sales growth of 4.9%. This optimistic forecast is bolstered by a clear strategic initiative to exit the underperforming Taco Bell business and redirect focus toward expanding its KFC footprint in Germany, while a stable full-year dividend of 26.0 cents per share signals underlying financial health.

Key Decisions for Investors

• Investors should weight the strong FY26 NPAT growth guidance of low to mid-teens more heavily than the backward-looking 14.8% profit decline, as it signals a potential earnings recovery and that peak cost pressures may have passed.
• The planned exit from the struggling Taco Bell business and sharpened focus on KFC expansion in Germany represents a key strategic catalyst that could de-risk the portfolio and improve long-term growth prospects.
• Monitor same-store sales figures and margin performance in upcoming quarters to validate that the easing inflation and strong brand campaigns are translating into the projected profit recovery.