Brexit hits Famous Brands hard in UK
Famous Brands’s woes in the UK are not abating.
The South African owner of Gourmet Burger Kitchen (GBK) reported rising losses for the British chain for a five-month period through July 29 — leading some analysts to speculate that the Johannesburg-based company may have had enough.
Gourmet Burger Kitchen is "the septic wart on the overall business and should be cut out", said Anthony Clark, an analyst at Vunani Securities. "They may consider exiting the market as it’s not getting any better."
Famous Brands ventured out of its South African heartland with the GBK deal in 2016 — shortly after the UK voted to leave the EU. But the chain of about 100 restaurants has not delivered the desired returns, with a sales decline in the most recent reporting period jarring with rising revenue in SA, where it owns popular outlets such as Debonairs Pizza, Steers Burgers and the upmarket Tashas chain.
GBK was losing market share to other UK premium-burger chains — there are more than 400 in the country — at the same time as customer preferences shifted to online orders or takeaways, Famous Brands said in May. In September, CEO Darren Hele said he saw difficult post-Brexit trading conditions persisting for at least the next 18 months.
"This is less of a Brexit recovery story now and more a story of fighting for share in an oversupplied commoditised burger market," said Janine van Wyk, an analyst at Avior Capital Markets in Cape Town.
"GBK is starting to affect Famous Brands’s South African cash flows, so it may make sense to sell GBK, although I’m not sure who would buy it."
Famous Brands said late on Thursday the chain had made an operating loss of £2.2m in the 22 weeks ending July 29, compared with £680,000 in 2017.
On Friday, the company said it was in talks about a division that might affect the share price, without giving further information. The stock dropped for a sixth day in Johannesburg, bringing its decline for the week to 7.5% and giving it a market value of R9.9bn.