Yahoo Finance Tim Hortons a bright spot for RBI as it misses sales expectations, stock falls
Tim Hortons remains a bright spot for parent company Restaurant Brands International (QSR)(QSR.TO), even as the company reported quarterly financial results that missed sales expectations, dragging the stock down as much as 6 per cent on Friday.
Sales at RBI, which operates Tim Hortons as well as Burger King, Popeyes and Firehouse Subs, reached $1.84 billion in the third quarter of the year, below the $1.87 billion forecast by analysts, according to Refinitiv IBES data available on Yahoo Finance. A let-up in some commodity costs helped RBI post an adjusted profit of 90 cents per share, above expectations of 86 cents, even as it invested heavily in advertising, restaurant technology and labour.
Still, the miss put pressure on RBI's stock, with shares falling as much as 6 per cent in early trading on Friday. The stock closed the trading day in New York at $67.79 per share, a decline of 2 per cent compared to Thursday's close.
Burger King's total comparable sales, a key metric in the retail industry that excludes recently opened locations, grew 7.2 per cent in the quarter, below analyst expectations of 8.7 per cent, according to LSEG data. Shrinking household budgets have forced some customers to cut back on restaurant food spending, a trend that has particularly dented traffic across the U.S. restaurant industry over the past few months.
Tim Hortons has so far remained resilient, with comparable sales surpassing expectations and growing 6.8 per cent overall in the third quarter, while growth in Canada alone reaching 8.1 per cent.
RBI said the improvement at Tim Hortons was driven by strong demand for breakfast and baked goods, growth in the lunch and dinner category, and improvements in operational efficiency. The company also said new products, including the smokey honey bacon breakfast sandwich and new lineup of dream cookies, helped drive trade ups among customers while also attracting younger guests to locations in more urban areas.
RBI chief executive Josh Kobza said on a conference call with analysts on Friday that the Tim Hortons business is set up to withstand challenging economic conditions, and that it so far has not seen any major changes to consumer behaviour in the wake of uncertainty.
"We have high quality products, incredibly convenient and we offer it at a compelling price point. I think that's a great place to be in any market, whether you're in a good side of the economic cycle or a little bit more difficult one," Kobza said, adding that the company has also improved speed and service at Tim Hortons and will continue introducing new products at compelling values.
"We're just going to keep focusing on the basics. I think we're well positioned regardless of the economic environment."
The strength at Tim Hortons comes after a multi-year, back-to-basics turnaround plan that has since shifted focus to growing its business in the lunch and dinner categories. The chain saw P.M. sales (which include the lunch and dinner categories) grow 7 per cent in the quarter.
"We're looking to make more progress there next year," Kobza said.
"We have some things in the pipeline that I think will allow us to do that. A lot of it will probably come in 2024."
With files from Reuters.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
Download the Yahoo Finance app, available for Apple and Android.
