Brokers approve of FY22 results for
-FY22 earnings for
-Early FY23 sales rise across all regions
-Price increases to help offset cost inflation
-Brokers debate the outlook for margins
Yesterday's FY22 results for
Earnings (EBITDA) of
Wilsons was impressed by FY22 profit growth of 26%, despite the company cycling very strong sales growth in the previous corresponding period (pcp) and having to navigate supply chain challenges.
While no explicit guidance was provided, company management revealed same store sales growth figures by region across the first seven weeks of FY23.
Management expects margins for KFC Australia in FY23 to be at the low-to-mid point of historic ranges and also anticipates margin headwinds of -1-2% for KFC Europe.
During FY22, the KFC Australia earnings (EBITDA) margin fell by -40bps on the prior year. Going forward, Outperform-rated Macquarie believes menu price increases will help offset margin headwinds from rising costs.
Neutral-rated Jarden is less sanguine than Macquarie (and management) and doesn't believe margin compression will abate in the second half of FY23. It's felt a large portion of increased costs, such as higher wages and input costs, are permanent in nature.
Jarden cites the chicken contract, which is up for renewal at the end of 2022, where the full effect of any price rise will be seen in the second half of FY23 and in FY24.
Post the results release, Morgans has upgraded its rating to Add from Hold and expects consumer demand will remain resilient. It's also thought the company will exhibit a degree of pricing power to help mitigate inflation in the year ahead.
Morgans forecasts positive same store sales growth in FY23 and believes some consumers will 'trade down' to
Additionally,
A final dividend of 15cps was declared, coming in above the 12.5cps from last year. Current broker forecasts in the FNArena database indicate a forward-looking dividend yield for FY23 and FY24 of 2.8% and 3.1%, respectively.
Outlook
As rising inflation and interest rates are likely to slow consumer spending, Macquarie prefers Consumer Staples over Consumer Discretionary in the retail space, though notes
There has already been a price increase this month and management suggests one more is likely before the end of 2022 to help partially offset further cost inflation from the poultry contract renegotiation.
However,
The FNArena database is updated daily for seven brokers, but only three of those cover
Outside of the database, Jarden has a Neutral rating and increased its target price to
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