Third trimester | A difficult economic environment for Restaurant Brands International

Third trimester | A difficult economic environment for Restaurant Brands International
Third trimester | A difficult economic environment for Restaurant Brands International

(Toronto) A “challenging” economic environment had a negative impact on Restaurant Brands International’s profits in its latest quarter, with sales falling for three of the company’s brands, but executives say they have already seen signs of improvement in October.


Published at 9:38 a.m.

Updated at 4:40 p.m.

Tara Deschamps

The Canadian Press

The Toronto-based company, owner of Tim Hortons, Burger King, Popeyes Louisiana Kitchen and Firehouse Subs, reported Tuesday that its third-quarter net income was $357 million, down from $364 million in the same quarter. of the previous financial year.

The company, which reports results in US dollars, revealed that the period ended September 30 saw comparable sales growth of 2.3% at Tim Hortons and 1.8% for RBI’s international business, but that Firehouse Subs was down 4.8%, Popeyes was down 4% and Burger King was down 0.7%.

However, Duncan Fulton, RBI’s director of corporate services, pointed out that these figures were similar to those of peers like McDonald’s and Yum Brands, which owns Pizza Hut and KFC.

“Many of them have had similar results,” he said in an interview Tuesday, where he noted that the consumer environment is improving “moderately.”

“We are seeing the benefits of improving rates, improving gas prices and moderating inflation,” he added.

The declines that many RBI properties suffered in late summer and early fall came as inflation fell below the Bank of Canada’s 2% target. However, after years of rising costs, consumers don’t feel like they get a break from grocery stores, malls and fast food chains.

Many consumers are clinging to the deal-seeking behaviors they adopted when inflation was much higher and are letting value menus and special deals guide their purchases at quick-service restaurants.

A “pretty good” quarter for Tim Hortons

Of all RBI’s brands, Tim Hortons has weathered the conditions the best so far.

“When we focus on the things that are completely within our control, listen to customers and owners, and execute well, then it doesn’t matter whether things get weaker or stronger from a macroeconomic perspective, because it’s always up to us to deliver the goods,” said Axel Schwan, president of Tim Hortons’ Canadian and American operations, in the same interview as Mr. Fulton.

“The last quarter was pretty good considering the circumstances,” he argued.

Tim Hortons spent much of the period promoting its flatbread pizzas, a product launched earlier this year to entice people to spend at the chain later in the day. The company now says that 70% of its flatbread pizza sales are made after 2 p.m. or on weekends and that those who purchase these items spend on average 2.5 times more than other customers.

The other cornerstone of its promotions during the quarter was an offer allowing customers to buy a hot breakfast sandwich for $3 when they purchased a coffee.

RBI’s other properties were not as successful.

For example, Firehouse Subs was unable to stem industry headwinds and Popeyes failed to provide certain offerings that consumers were looking for, Joshua Kobza, RBI chairman and CEO, said during a previous conference call with analysts.

“We know we need to deliver better value, which we can deliver through better pricing and a better experience,” he said.

Burger King’s challenges in China

There is also work to be done overseas with Burger King China, which CFO Sami Siddiqui described as “difficult”.

In the same conference call with Mr. Kobza, Mr. Siddiqui said that RBI had recently sent termination notices to its master franchisee, with whom it is now in dispute.

Mr Siddiqui hoped they could find “an amicable solution”.

“We believe this is a short-term situation and we are committed to the long-term success of the company in China,” he said.

Mr. Fulton declined to say whether Burger King would seek a master franchise deal in China again once it resolves its current problems. Instead, he called the market “incredibly important,” but agreed with Mr. Siddiqui that “there is work to be done.”

In releasing its results on Tuesday, the company said its profit amounted to 79 US cents per share for the quarter ending September 30, the same amount as a year earlier.

Revenue for the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs totaled US$2.29 billion, up from US$1.84 billion a year ago.

Consolidated comparable sales increased 0.3%.

On an adjusted basis, Restaurant Brands said it earned 93 US cents per share in its most recent quarter, up from adjusted earnings of 90 US cents per share a year earlier.

Analysts’ average estimate was 95 U.S. cents per share, according to LSEG Data & Analytics.

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