Tim Hortons’ parent company reports flat sales

Restaurant Brands International Inc. says comparable sales at locations open at least a year were down one-tenth of a per cent at both Tim Hortons and Burger King, after adjusting for currency fluctuations. Image: Sean Kilpatrick, The Canadian Press

NEW YORK -- The owner of Tim Hortons and Burger King is reporting flat sales at its established locations in the first quarter, but a 9-per-cent increase in revenue, which was above analyst estimates.

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Shares of Restaurant Brands International Inc., tumbled the most since August 2015 after Burger King’s same-store sales fell 0.1 per cent in the first three months of the year. That trailed the 1.5 per cent gain estimated by analysts, according to Consensus Metrix.

The burger chain is facing more U.S. fast-food competition, especially for cheap deals. McDonald’s Corp. has been advertising $1 (U.S.) and $2 drink specials, while Wendy’s Co. has had success with its four-for-$4 meal. Grocery deflation is also roiling the industry because it’s increasingly cheap for consumers to eat at home. In the U.S., Burger King same-store sales fell 2.2 per cent, according to a statement Wednesday. Analysts estimated a 0.3 per cent drop for the U.S. and Canada combined.

In contrast, McDonald’s reported a 4 per cent gain in same-store sales last quarter on Tuesday, topping analysts’ projections. Its drink promotions and a revamped Big Mac sandwich helped fuel growth.

Burger King, meanwhile, offered a new crispy chicken sandwich last month and has added a shake made with Froot Loops to its menu in a bid to drive restaurant traffic.

“The business will always be competitive,” Restaurant Brands chief executive officer Daniel Schwartz said in an interview. “But regardless of what going on at the macro level, it's our job to drive sales growth and profitability growth for our restaurants.”

Restaurant Brands shares fell as much as 7.6 per cent to $54 in New York trading, the biggest intraday decline in 20 months. The Oakville, Ont.-based company had gained 23 per cent this year through Tuesday’s close.

Same-store sales also dropped at Restaurant Brands’ Tim Hortons. They fell 0.1 per cent, while analysts projected a 0.8 per cent gain.

The company added 30 Burger King locations and 31 Tim Hortons in the quarter, which may have helped it surpass analysts’ projections for profit and revenue. Earnings climbed to 36 cents a share, excluding certain items, topping estimates by 2 cents. Sales rose to $1 billion, compared with the average prediction of $989.4 million.

Popeyes Louisiana Kitchen, which Restaurant Brands bought earlier this year for $1.8 billion, is seen as a potential growth engine for the company. But it, too, posted a drop in same-store sales during the period, with the measure falling 0.2 per cent. The plan is for the 2,600-location Popeyes to be independently managed in the U.S.

SOURCE Leslie Patton, Craig Giammona, Bloomberg