RBI focuses on turnaround effort after missing key sales forecasts

TORONTO Restaurants Brands International Inc. posted an 87-per-cent surge in profits in the second quarter, but same-store sales trailed projections at all three of its chains, including Tim Hortons.

The company, which has been involved in a very public spat with some of its Tim Hortons franchisees, said system-wide sales growth at the Canadian coffee chain grew 2.2 per cent, while other brands Burger King and Popeyes Louisiana Kitchen saw a growth of 8.4 per cent and 10.7 per cent, respectively. However, same-store sales — a key industry metric — at Tim Hortons were flat, compared with a 0.8-percent dip a year earlier. Same-store sales at Burger King rose 1.8 per cent last quarter, compared with projections for a gain of 2.4 per cent, according to Consensus Metrix, while Popeyes Louisiana Kitchen same-store sales rose 2.9 per cent in the second quarter, compared with estimates for 3.4 per cent growth.

To address some of the franchisee’s concerns, in June the company announced a $100-million capital investment plan over the next two years to strengthen the Tim Hortons supply chain network.

“Core to executing well against our plans is listening to and working closely with our franchisees,” said Daniel Schwartz, chief executive of RBI. The investment involves building two new distribu- tions centres in Alberta and British Columbia and expanding existing facility in Nova Scotia.

The company also launched the “winning together initiative” announced last quarter and implemented all-day breakfast last week, which should help boost third or fourth quarterly earnings, amid strong competition.

“Our breakfast anytime program appealed to 75 per cent of respondents and roughly 60 per cent of our guests indicated they’d likely buy a breakfast sandwich after 12 noon,” said Schwartz of third party research done for the initiative.

The brand is also in the planning stages of creating a new kids’ menu and introducing card-based and app-based loyalty programs. They have recently completed a string of renovations and new Timbits marketing to improve its brand image.

“We were also encouraged to see stable results at Tim Hortons and the launch of all-day breakfast, which we believe will drive incremental traffic gains,” Stephens Inc analyst Will Slabaugh said. Financial Post