Burger King propels Restaurant Brands' swing to profit
Aug. 3, 2017
by Monica Watrous
A mix of premium items, including a Bacon King burger, contributed to growth in the United States.
OAKVILLE, Ontario — Beyond its flame-grilled burgers, new milkshakes featuring Kellogg’s Froot Loops and General Mills’ Lucky Charms cereals lured more customers to Burger King restaurants in the recent quarter, helping parent company Restaurant Brands International Inc. deliver a quarterly profit that beat analysts’ expectations.
Net income attributable to common shareholders in the second quarter ended June 30 was $89.5 million, equal to 38 cents per share on the common stock, down from $90.9 million, or 39 cents, in the year-ago period. Adjusted EBITDA rose 9 percent over the prior year’s combined results including Popeyes, which the company acquired this past March.
Revenues for the quarter totaled $1,132.7 million, up from $1,040.2 million.
|Daniel Schwartz, CEO, Restaurant Brands International
“This quarter, we continued to grow systemwide sales and profitability for all three of our iconic brands: Tim Hortons, Burger King and Popeyes,” said Daniel S. Schwartz, CEO, during an Aug. 2 earnings call with investment analysts. “While comparable sales growth for Tim’s and Popeyes was softer this quarter, we believe we have the right strategies in place to grow sales for restaurant in the long run for both brands.”
Comparable sales in the quarter increased 3.9 percent at Burger King and declined 0.8 percent and 2.7 percent at Tim Hortons and Popeyes, respectively.
“We had a particularly strong quarter at Burger King with improving comparable sales growth and accelerating net restaurant growth,” Schwartz said. “We also made good progress integrating Popeyes this quarter and continue to be excited by the long-term potential for the brand.”
At Burger King, a mix of premium items, including a Bacon King burger and Chicken Parmesan sandwich, contributed to growth in the United States. The Froot Loops and Lucky Charms shakes and Mac n’ Cheetos snacks “are fun, tasty products that resonated positively with our guests and helped drive traffic into our restaurants,” Schwartz said.
Tim Hortons experienced softness in its lunch and bakery items in Canada.
Meanwhile, the Tim Hortons brand experienced softness in its bakery and lunch items in Canada, Schwartz said. Several promotions, he added, including Nutella baked items and a summer cold beverage lineup, were less effective than in prior years.
“Both our espresso-based beverage platform and the launch of our digital app excite us about the growth potential for the Tim’s Canada business, and we continue to make good progress expanding the brand all around the world, now including with a partner in Spain,” Schwartz said.
Marketing plans in the second quarter were less focused on value compared to Popeyes' competitors.
At Popeyes, increased competitive activity in the quarter and the lapping of a successful promotion in the year-ago period hurt comparable sales results. More competitor chains are focusing on value bundling, Schwartz noted.
“When we acquired the business in late March, many of the marketing plans for the second quarter had already been set and were less focused on value in comparison to the prior year and compared to some of our competitors,” Schwartz said. “In the last few months, our marketing team has worked closely with our franchisees to test a number of promotions and product launches and to revise the marketing calendar for the balance of the year.
“We remain confident in our ability to improve comparable sales growth and thus grow restaurant level sales and probability over the long term.”