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The share price of Famous Brands, the owner of Steers, Wimpy and Debonairs Pizza, has hit levels last seen in 2012 on Thursday after releasing a trading update.
In the update, issued on Wednesday, the company said sales across the group rose by 6.4% for the year to end-February. Like-for-like sales (excluding sales of closed and new restaurants) rose 2.9%.
The group faced margin pressures given the "intensely competitive trading landscape" as well as sustained low food inflation. Load shedding and a "lack of economic reforms" weighed heavily on consumer and business confidence, it noted.
Domestically, the group said performance during the peak summer holidays met expectations, despite the "untimely setback" caused by load shedding.
Its "leading brands" - such as Wimpy, Mugg & Bean and Milky Lane - increased their sales by an estimated 5.7% (like-for-like sales are up 3.5%). Its "signature brands" - like Tashas and Vovo Telo - saw sales growth of an estimated 10.6% - but like-for-like sales fell 0.8%.
"Notably, while low menu pricing assisted with customer retention, it had an adverse impact on inflationary growth," the group said.
It added that certain brands remain "the subject of critical review".
Its operations in the rest of Africa and Middle East are estimated to report sales growth of 4.1% in rand terms.
In the UK, where it operates Gourmet Burger Kitchen (GBK), it faced "difficult and intensely competitive" trading conditions, which it blamed on Brexit uncertainty. Sales in pound fell by an estimated 13.9% - due in part to the closure of some restaurants. Like-for-like sales increased by 3.7%.
"Management is satisfied that ongoing and extensive operational improvements as well as the benefits derived from the Company Voluntary Arrangement restructuring programme continue to impact positively on the business," the group said. Famous Brands bought GBK in 2016 for R2.1 billion. In 2018 the group had to write down R874 million on the business. The CVA process was subsequently initiated to turn around the business.
After almost halving since the start of the year, its share price tanked another 3% on Thursday by lunchtime. It lost 11% on Wednesday.
Independent analyst of Small Talk Daily Anthony Clark tweeted that the latest trading update won't help the share's prospects, following yesterday's losses.
The Famous Brands results are expected to be published by 26 May 2020.
