Free Subscription

  • Access 15 free news articles each month

Professional

Try one month for $5
  • Unlimited access to news,insights and opinions
  • Quarterly and weekly magazines
  • Independent research reports and forecasts
  • Quarterly webinars with industry experts
  • Q&A with retail leaders
  • Career advice
  • Exclusive Masterclass access. Part of Retail Week 2021

Restaurant Brands International’s slow sales growth

2008-11-11_Burger_King_in_DurhamRestaurant Brands International Inc. reported a profit of $247.6 million, up from $93.8 million the previous year, while total revenues slipped 0.2 per cent to $1.04 billion.

The Ontario-based company posted a 2.7 per cent increase in comparable sales for its Tim Hortons brand and a 0.6 per cent comparable sales for Burger King.

Despite the slow quarter, Daniel Schwartz, CEO of Restaurant Brands International Inc. said, they ended the second quarter with solid system-wide sales growth at both of their iconic brands, Tim Hortons and Burger King, driven by growth in their “global restaurant footprint and compelling product launches”.

“We continued to achieve strong earnings growth versus prior year results and believe that the execution of our brand-specific strategies by our franchisees and employees will drive sustainable value for years to come,” Schwartz said.

Neil Saunders, CEO of Conlumino, said although the headline result of a 0.2 per cent decline in overall revenue looks somewhat gloomy, this is mostly the consequence of a strong US dollar and weak Canadian dollar, a dynamic that has affected revenues from Tim Hortons.

Saunders said the underlying numbers are slightly better, with both divisions in positive territory on a comparable sales basis and system-wide sales up by 0.6 per cent even after the impact of exchange rate fluctuations.

“Despite the fact that both Burger King and Tim Hortons are in growth territory, the loss of sales momentum from previous quarters is evident. This is in-line with the recent numbers from rivals like McDonalds and Yum!, both of which saw growth moderate,” he said.

“This trend is being driven, primarily, by a slowdown in spending on eating out by American consumers – something that explains Burger King’s flat system-wide sales growth and 0.8 per cent decline in same-restaurant sales across the US and Canada.”

According to Saunders, with Burger King performing strongly in both Asia Pacific and Latin America – where same-restaurant sales rose by 5.3 per cent and 4.9 per cent, respectively, offset the weak numbers and helped nudge the division into overall growth.

“That said, the softness in the US market is disappointing given the initially positive reaction to menu changes and the introduction of hot dogs. In our view, it underlines the fact that menu change and innovation is not now something that can be done periodically: fast food players need to see this as a constant process that has to be supported by ongoing promotions and marketing activity,” he said.

Saunders said despite its recent slowdown McDonald’s has a slight edge over Burger King, and is doing more to shake up its traditional business model to maintain consumer interest and drive growth. “All that noted, the one saving grace for Burger King is good cost control which allowed EBITDA to grow by 3.7 per cent this quarter.”

“Being buffeted by an unfavorable exchange rate notwithstanding, Tim Hortons had a reasonably solid quarter with good underlying growth in Canada, where same-restaurant sales rose by 2.3 per cent.”

He said this was supported by the opening of 25 new outlets in the country, which facilitated system-wide sales growth of 4.4 per cent. However, only two new Tim Hortons stores were opened in the US across the period.

“Given that Tim Hortons has an objective to ‘win’ in the US, we believe that it has significant headroom over and above the 658 restaurants it currently operates. This is especially so considering that Tim Hortons in the US put in the best same-restaurant performance of any division across any geography, with sales up by 5.9 per cent over the period,” Saunders said.

Conlumino’s CEO said overall, Restaurant Brands continues to make progress; but with spend tightening and competition intensifying it now needs to up the pace of innovation if it is to grow further.

Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week. 

You have 7 free articles.