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Tim Hortons sales reached above pre-pandemic levels for the first time since the onset of COVID-19, as traffic returned and nearly all product categories saw sales growth in the second quarter of the year.
Restaurant Brands International (QSR)(QSR.TO) – the parent company of Tim Hortons, Burger King, Popeyes and Firehouse Subs – says system-wide sales growth at the coffee and doughnut chain increased 16.3 per cent in the three-month period ending June 30. Comparable sales at Tim Hortons, a key metric in the retail industry that excludes recently opened locations, jumped 14.2 per cent in Canada compared to the same quarter last year, above the growth seen at Burger King (10 per cent) and Popeyes (1.4 per cent). RBI chief executive Jose Cil says comparable sales at Tim Hortons were up 2 per cent compared to the same quarter in 2019, before the pandemic hit and customers largely stayed at home.
"This performance was a result of continued improvements in our core breakfast, baked goods and coffee offerings; extensions to our PM food and cold beverage lineup; and our second collaboration with Justin Bieber, all of which have been aided by increased mobility and targeted strategic pricing initiatives," Cil said on a conference call with analysts on Thursday.
"It's clear that the groundwork we laid during phase one of our back-to-basics plan is paying off with guests, as they return to Tims following the easing of restrictions."
Throughout the pandemic, sales at Tim Hortons lagged RBI's other brands as morning routines were disrupted and restrictions were implemented in regions across the country. But with pandemic restrictions now lifted, Tim Hortons' traffic and sales have returned, with all product categories except hot beverages seeing positive growth compared to 2019. While hot coffee sales did not increase, Cil notes that growth in categories such as cold beverages, lunch and dinner is "fully offsetting the headwinds from hot beverage sales."
As sales have increased, so have prices at all of RBI's chains. The company says price hikes have been in line with increases in the Consumer Price Index.
"There's no one element that determines it," RBI's chief corporate officer Duncan Fulton said in an interview.
"We need to look at the impact of commodity costs on the business, at highly competitive value pricing for our guests, and profitability of our franchises... we need to put all those factors together to decide how to carefully, deliberately adjust prices so that they stay in line with all those elements."
Lunch and dinner at Tim Hortons
The sales boost comes as Tim Hortons transitions from its back-to-basics strategy, one where the company was highly focused on improving core offerings like coffee and breakfast items, to growing the business, including in new categories such as dinner and cold beverages. The company first unveiled its strategy to extend further into the lunch and dinner category – representing an $8.5 billion market – at its Investor Day in May, noting that Tim Hortons' market share is just 4 per cent.
So far, the strategy appears to be working. Cold beverage sales are up 12 per cent compared to pre-pandemic levels, the company says, while the lunch category is up 9 per cent. Dinner sales are also up 14 per cent from the last quarter.
Fulton says the company has received positive feedback from customers following the launch of its "loaded wraps and bowls", two items aimed at attracting the dinner crowd. The products have also helped attract younger guests and those that previously visited Tim Hortons only for breakfast and snack options.
"The quarter is a good example of how we can continue to drive growth by being great at the basics and by offering exciting improvements and modifications that bring in new folks for different day parts and different occasions," Cil said.
Still, the company sees room to grow at Tim Hortons, particularly in downtown cores where traffic has yet to return to pre-pandemic levels.
"Mobility in downtown corridors is still a work in progress and that gives us confidence that if it comes back to pre-pandemic levels, there will be some tailwind in the business as well," Cil said.
RBI, which reports its earnings in U.S. dollars, saw sales grow 14 per cent in the second quarter, with system-wide sales up nearly $1 billion compared to 2021, hitting $10 billion. Adjusted net income was $373 million in the second quarter, or 82 cents per diluted share, up from $358 million, or 77 cents per diluted share, last year. The company's stock was up more than 6 per cent shortly after 12:30 p.m. ET on Thursday.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.