Results for Tim Hortons parent Restaurant Brands International Inc. fell short of analysts’ expectations amid slowing demand.Doug Ives/The Canadian Press
A sluggish consumer environment has led fast-food giants across the industry to compete with more value offerings to entice visitors – a trend that affected Tim Hortons and Burger King parent company Restaurant Brands International Inc. QSR-T in its most recent quarter.
But the Canadian coffee-and-doughnut chain helped to buoy otherwise lacklustre results as “one of the only major QSR [quick-service restaurant] brands in the market with positive traffic growth” so far this year, chief executive officer Josh Kobza told analysts on a conference call Tuesday.
Toronto-based Restaurant Brands, facing slowing demand, reported third-quarter results that fell short of analysts’ expectations. The company’s comparable sales – an important metric that tracks sales growth not tied to new store openings – grew by only 0.3 per cent in the three months ended Sept. 30, compared with the same period last year.
By contrast, Tim Hortons’s comparable sales grew by 2.3 per cent on a global basis, and were up 2.7 per cent in Canada. The company’s other fast-food chains, Burger King, Popeyes Louisiana Kitchen and Firehouse Subs, all reported comparable sales declines.
The drivers of sales growth at Tim Hortons have shifted, executive chair Patrick Doyle said on the call. In recent years, while people were visiting its locations more often, inflation also contributed to higher sales, he said. More recently, as inflation has cooled, more of the sales growth has been tied to convincing customers to visit more often – something the company’s other chains are working to improve.
“While we are already seeing signs of improvement in the U.S. and overseas in October, it may take a few more quarters for the macro environment to even out, and for us to see consolidated same-store sales tracking towards our 3-per-cent-plus long-term guidance,” Mr. Doyle said.
Consumers struggling to manage their budgets have been eating less at restaurants, which has affected traffic across the industry, including at quick-service competitors such as McDonald’s.
Fast-food chains have been responding with meal deals to attract more customers. At Tim Hortons, a recent promotion offering a $3 hot breakfast sandwich with any coffee purchase helped to boost traffic.
“Everyone is dealing with the same consumer environment that’s out there,” Restaurant Brands chief corporate officer Duncan Fulton said in an interview on Tuesday. More recently, consumers have begun to feel some relief from interest-rate cuts and slowing inflation, he added.
“Overall, there’s certainly a sentiment that things are good and getting moderately better.”
Restaurant Brands reported its net earnings fell slightly to US$357-million or US$0.79 a share in the quarter, compared with US$364-million or US$0.80 a share in the prior year.
Revenue grew by 24.7 per cent to US$2.29-billion. The jump was mostly due to two acquisitions this year: the company bought its largest U.S. Burger King franchisee, Carrols Restaurant Group Inc., as well as Popeyes China. Restaurant Brands has said it eventually intends to re-franchise the majority of the Carrols Burger King restaurants, and to find a new franchise partner for the Popeyes China business.
That still fell below analyst expectations of US$2.35-billion in revenue and US$418.9-million in net earnings, according to the consensus estimate from S&P Capital IQ.