Restaurant Brands Sales Meet 1st Q Expectatations

30 May 2005
News release

Restaurant Brands Sales Meet First Quarter Expectations

Restaurant Brands today released the company’s first quarter sales results showing sales in line with expectations.

Chief executive Vicki Salmon said today that total sales for the 12 weeks to 23 May were $72.4 million. New Zealand operations were up 0.4% on the same period last year and Australian operations up 1.7%, although exchange rate movements impacted the overall result.

“The business is continuing its steady progress and the figures this quarter are tracking similar to last year,” Salmon said.

KFC sales were $38.8 million, down 3.0%, while same store sales reduced by 1.4%.
“Several factors we had already signalled had an effect on KFC, including the brand refurbishment programme which required some temporary store closures. We also removed the delivery service from nine stores and closed one unprofitable mall store in Manukau.

“On the plus side, promotional activity around Popcorn Chicken and new Twister variants contributed positively to the quarter,” Salmon said.

Following the success of the first newly-transformed KFC store in Frankton, a second refurbished KFC store was re-opened in Mangere East during the first quarter that is showing similar strong results.
In the 10 weeks since re-opening, Mangere East has – like Frankton - seen sales substantially above the pre-refurbishment levels. A third refurbished KFC will open this week in Hamilton East.

“This programme will then be rolled out to other select locations during the rest of this financial year,” said Salmon.

Following a rapid growth in stores during the past year, Pizza Hut New Zealand’s sales increased 4.4% during the first quarter, to $20.6 million.

“An initial short-term cannibalisation of new stores contributed to a 3.7% decline in same stores sales during the period. However, most of this drop was due to the warmer than usual weather, and increased competitor activity.

“However, as the weather deteriorated towards the end of the quarter, sales improved, returning to their historic norms for this time of the year,” she said.

“We will also be launching a new range of gourmet pizzas during the second quarter which is expected to further drive Pizza Hut New Zealand sales, as will the continuation of the new store development programme,” Salmon said.

The Napier outlet was relocated during the quarter, with store numbers constant at 101.

Starbucks Coffee continued its solid performance, delivering the sixth consecutive quarter of sales growth. Total sales increased 10.2% to $6.2 million in the first quarter, with same store sales up 1.2%.

“In contrast to Pizza Hut, Starbucks Coffee sales were helped by the long hot summer, with Frappuccino and other iced drinks performing particularly well."

One new store (kiosk) was opened at the end of the quarter in Botany Downs, taking the total number of Starbucks Coffee stores to 40.

Salmon said Pizza Hut Victoria sales continued to grow, following a successful stuffed crust pizza promotion and keeping the focus on improved customer experience.

Total sales for the quarter increased 1.7% to A$6.4 million and same store sales increased 2.4%.

“Pizza Hut Victoria is showing consistent improvement, with the eighth consecutive quarter of positive growth."

One delivery outlet was relocated, bringing a significant improvement in sales, with total store numbers constant at 51.

Salmon said Restaurant Brands’ total sales were expected to steadily improve during the second quarter and for the rest of the year, with a strong focus on customer service efficiencies, store development and new menu items.

“The colder weather and beginning of the winter sports season is already positively impacting sales at Pizza Hut New Zealand, which will also benefit from the launch of the new gourmet range.
“Ongoing brand transformation and a strong promotional calendar are also expected to contribute to sales growth for KFC,” she said.

- ends -

RESTAURANT BRANDS FIRST QUARTER SALES

Restaurant Brands today announced total sales of $72.4 million for the first quarter of its 2005/06 financial year. New Zealand operations were up 0.4% on prior year and Australian operations up 1.7%. The overall result was however impacted by exchange rate movements.

KFC
KFC sales totalled $38.8 million for the quarter, down 3.0% and same store sales reduced 1.4%.
As anticipated, sales at KFC during the first quarter were impacted by a number of factors, including the brand refurbishment programme which required some temporary store closures. The removal of delivery service from nine stores when compared with the prior year and permanent closure of one store also had an adverse impact.

Promotions of Popcorn Chicken and new variants on Twister contributed positively to the quarter, but there were mixed results from other promotional activity.

Following the successful trial of brand transformation programme in Frankton, Hamilton, a second refurbished KFC store in Mangere East was re-opened during the first quarter. In the 10 weeks since re-opening, Mangere East has seen similar results to the Frankton store, with sales substantially above the pre-refurbishment levels. The third refurbished KFC store is set to open in early June at Hamilton East and this new programme will be rolled out to other select locations this financial year.
With the closure of an unprofitable mall store in Manukau at lease end, store numbers finished at 86.

Pizza Hut
Following the rapid growth in stores over the past year, Pizza Hut New Zealand’s sales increased 4.4% during the first quarter, to $20.6 million.

The initial short-term cannibalization of new stores on the existing base contributed to some of the 3.7% decline in same stores sales during the period. However, the majority of this decline was due to the warmer than usual weather for most of the quarter, together with increased competitor activity. As the weather deteriorated towards the end of the first quarter, there was a corresponding increase in sales as they returned to their historic norms for this time of the year.

There were a number of promotions during the quarter, the most successful of which was the basil pesto stuffed crust pizza.

Following a successful trial, a new range of gourmet pizzas will be launched nationwide during the second quarter, and is expected to further drive Pizza Hut New Zealand sales.

The Napier Pizza Hut was relocated during the quarter with total store numbers remaining constant at 101. The company still plans to maintain its new store development programme for Pizza Hut outlets this financial year.

Starbucks Coffee
The Starbucks Coffee business continued its solid performance, delivering the sixth consecutive quarter of sales growth. Total sales increased 10.2% to $6.2 million in the first quarter. On a same store basis, sales increased 1.2% compared with the prior year period.

In contrast to Pizza Hut, Starbucks Coffee sales were helped by the long hot summer, with Frappuccino and other iced drinks performing particularly well.

One new store (kiosk) was opened at the end of the quarter in Botany Downs bringing the total number of Starbucks Coffee stores to 40.

Pizza Hut Victoria
A successful stuffed crust pizza promotion and a continuing focus on improved customer experience contributed to the sales growth at Pizza Hut Victoria. Total sales increased 1.7% to A$6.4 million and same store sales increased 2.4% over the prior year period, showing positive growth for the eighth consecutive quarter.

During the quarter, one delivery outlet was relocated and has shown a significant improvement in sales since reopening. Total store numbers were constant at 51.

Outlook
A continued focus on customer service efficiencies, store development and new menu items are expected to continue to drive total company sales during the second quarter and full year.

The colder weather and beginning of the winter sports season is already positively impacting sales at Pizza Hut New Zealand, which will also benefit from the launch of the new gourmet range. Continued brand transformation benefits and a strong promotional calendar in the quarter are also expected to contribute to sales growth for KFC despite temporary store closures with the brand transformation programme.

RESTAURANT BRANDS NEW ZEALAND LIMITED
Quarterly Sales Report
Summary of Results for the 1st Quarter (Q1)
(for the 12 weeks 01/03/05 - 23/05/05)

Q1 2005/6 vs Q1 2004/5 Q1 2005/6 ($000's) Q1 2004/5 ($000's) % change
Total Store Sales - KFC 38,770 39,966 -3.0%
Total Store Sales - Pizza Hut NZ 20,631 19,770 4.4%
Total Store Sales – Starbucks Coffee 6,180 5,606 10.2%
Total NZ Concepts 65,581 65,342 0.4%
Total Store Sales - Pizza Hut Victoria* 6,793 7,182 -5.4%
TOTAL STORE SALES 72,374 72,524 -0.2%

Same Store Sales - KFC 38,770 39,320 -1.4%
Same Store Sales - Pizza Hut NZ 18,848 19,577 -3.7%
Same Store Sales – Starbucks Coffee 5,673 5,606 1.2%
Total NZ Concepts 63,291 64,503 -1.9%
Same Store Sales - Pizza Hut Victoria** 6,566 6,415 2.4%
TOTAL SAME STORE SALES 69,857 70,918 -1.5%

YTD 2005/6 vs Q1 2004/5
Total Store Sales - KFC 38,770 39,966 -3.0%
Total Store Sales - Pizza Hut 20,631 19,770 4.4%
Total Store Sales - Starbucks 6,180 5,606 10.2%
Total NZ Concepts 65,581 65,342 0.4%
Total Store Sales - Pizza Hut Victoria 6,793 7,182 -5.4%
TOTAL STORE SALES 72,374 72,524 -0.2%

Same Store Sales - KFC 38,770 39,320 -1.4%
Same Store Sales - Pizza Hut 18,848 19,577 -3.7%
Same Store Sales – Starbucks Coffee 5,673 5,606 1.2%
Total NZ Concepts 63,291 64,503 -1.9%
Same Store Sales - Pizza Hut Victoria** 6,566 6,415 2.4%
TOTAL SAME STORE SALES 69,857 70,918 -1.5%

NUMBER OF STORES OPEN AT QUARTER END
Qtr End no of Stores - KFC 86 87
Qtr End no of Stores - Pizza Hut 101 92
Qtr End no of Stores – Starbucks Coffee 40 35
Total Stores - NZ Concepts 227 214
Qtr End no of Stores - Pizza Hut Victoria 51 51
TOTAL QTR END NO OF STORES 278 265

* Includes adverse impact of foreign exchange movement of 7.1%.

** Same store sales prior year comparatives are restated to current year exchange rates
to enable like comparison. The following table shows sales performance in Australian Dollars.

Pizza Hut Victoria Sales Performance - AUD
Q1 2005/6 ($000's) Q1 2004/5 ($000's) % change

Q1 2005/6 vs Q1 2004/5
Average AUD/NZD translation rate $0.938 $0.873
Total Store Sales 6,372 6,268 1.7%
Same Store Sales 6,159 6,020 2.4%

YTD 2005/6 vs Q1 2004/5
Average AUD/NZD translation rate 0.938 $0.873
Total Store Sales 6,372 6,268 1.7%
Same Store Sales 6,159 6,020 2.4%

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