‘Ottawa’ Owner of Burger King and Tim Hortons Reports eight-fold Profit Jump as New Lunch Menu Clicks
TORONTO — The parent company of Tim Hortons and Burger King saw its profit soar as the company added restaurants to its global network and saw higher sales of wraps and lunch salads.
Net income at Restaurant Brands International Inc. in the second quarter leapt to US$90.9 million, or 38 cents per share, up from US$11 million (five cents) in the second quarter of 2015. Adjusted earnings of 41 cents per share in the period ending June 30 beat analyst estimates of 35 cents. Last year’s profit was reduced by one-time costs associated with the restaurant company’s acquisition of Tim Hortons.
Revenue was flat at US$1.04 billion, largely due to a negative currency impact.
Shares rose three per cent in afternoon trading to US$46.05.
Chief executive Daniel Schwartz said the company is keen to further expand Tim Hortons’ lunch menu after the recent success of new offerings including side salads, potato wedges and the Chicken Bacon Ranch Wrap.
The side dishes will be “very important to building our lunch business over time,” Schwartz said in an interview.
“We still see such a big opportunity to continue to grow the size of our lunch business,” which is smaller than the company’s breakfast business.
During the quarter the company secured a development deal in Minnesota to open Tim Hortons outlets with local partners over the next 14 years. Last week, the rapidly expanding Canadian coffee and baked goods chain announced a development deal for the Philippines.
Tim Hortons’ systemwide sales were US$1.67 billion, up from US$1.66 billion a year ago due to currency fluctuations.
Same store sales, which strips out the effect of new square footage, grew 2.7 per cent. The company operated 4,464 global restaurants in the period, compared with 4,322 in the second quarter of last year.
At Burger King, sales grew to US$4.54 billion from US$4.4 billion a year ago as the company added 572 restaurants over the year to its network.
Same-store sales were a meagre 0.6 per cent compared with a year ago, when sales at stores open for more than a year rose 6.7 per cent.
Analysts noted the loss of sales momentum at Burger King has been reflected recently by fast-food rivals such as McDonalds and Yum!
“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 U.S. and Canada,” said Neil Saunders, chief executive of New York-based research firm Conlumino. That slide was offset by solid growth in Asia Pacific and Latin America, where same-restaurant sales rose by 5.3 per cent and 4.9 per cent, respectively.
But the softness in the U.S. market is disappointing given the initially positive reaction to menu changes and the introduction of grilled hot dogs to the burger chain’s U.S locations, Saunders said.
“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. … With spend tightening and competition intensifying, (Restaurant Brands) now needs to up the pace of innovation if it is to grow further.”