The fast and the spurious: Reality bites the casual dining sector

Business

The fast and the spurious: Reality bites the casual dining sector

After Famous Brands' dud UK foray it should probably cut its losses and leave, says an analyst

Chris Gilmour

Twenty years ago, Famous Brands (then known as Steers) was beginning its upwards trajectory of fundamental earnings growth as well as share price. Its model of expansion was predominantly by acquisition, and this kept on producing enviable results – until it ran out of road in SA and went one step beyond, buying Gourmet Burger Kitchen (GBK) in the UK in 2016.

Anthony Clark, independent analyst at Small Talk Daily, is scathing about the ill-timed GBK transaction and believes that Famous Brands overpaid in its desperation to chase growth outside of the stagnant SA market.

“GBK will go down as possibly THE worst food investment made by any SA corporate,” he says, “although the list of companies that have burnt their balance sheets moving overseas is long and deep.” Clarke notes that SA businesses go into foreign markets thinking that “their way” will work in a localised market. “They all end up having buyer’s remorse.”..

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