TIM HORTONS’ BRAND SLIPPING AS COMPETITION GROWS .
Parent company faces intense competition
TORONTO• Executives of Restaurant Brands International Inc. fielded questions about the performance of the Tim Hortons brand in its home market on Wednesday after the company reported a slide in same- store sales at all of its restaurant brands in an increasingly competitive fast-food market.
Shares of the Torontobased owner of Tims, Burger King and Popeyes Louisiana Chicken fell as much as seven per cent before recovering, closing three- per- cent down at $77.02.
Same-store volume at Tim Hortons outlets in Canada slid 0.2 per cent, prompting analyst concerns that the beloved brand might be getting oversaturated on its home turf.
At Burger King, samestore sales dropped in its home market of the U.S. by 2.2 per cent and Popeye’s same- store sales fell 0.4 per cent stateside. Overall samestore sales fell 0.1 per cent in constant currency at Tim Hortons and Burger King, respectively, and fell by 0.2 per cent at Popeyes.
“We try to not get too caught up in the quarter- toquarter results,” chief executive Daniel Schwartz told analysts at a conference call, adding the company and its franchisees regard the restaurants as long-term investments.
About 82 per cent of Tim Hortons restaurants are located in Canada, while 15 per cent are in the U.S. and the remainder in markets such as the Middle East.
“In each year since we acquired Tim Hortons ( in 2014) and created Restaurant Brands International, we have grown the profits for our franchise owners to record levels in 2016 and look forward to working collaboratively with them for many years to come to grow the brand,” Schwartz added.
The company has steadily increased profits and sales and aggressively expands Burger King and Tim Hortons into new international markets.
But analyst Peter Sklar of BMO Capital Markets expressed concern Wednesday about the negative trends at Tims and Burger King amid a tepid period in North America for classic quickserve restaurants, which have faced pressure from fast casual chains such as Chipotle and Panera Bread.
“We consider same- store sales to be perhaps the most critical indicator of stock performance in the restaurant sector, as it is a measure of the long- term financial health of the franchise network,” Sklar wrote in a note to clients Wednesday.
The news comes as Tim Hortons rejigs its Canadian coffee business while battling Starbucks and McDonald’s.
The latter has been siphoning coffee market share since getting into the business seriously in 2009, although Tim Hort ons still sells about eight out of every 10 cups of coffee in the quick-service restaurant segment in Canada.
Last month, Tim Hortons introduced a stronger, richer variation of its dark roast coffee blend in Canada after the original version, launched in 2014, failed to gain enough traction with consumers.
And on Wednesday, the veteran doughnut chain overhauled i ts espressobased drinks to a new system that makes improved lattes with fresh ground beans and milk, jettisoning a machine that used espresso powder and pre-portioned milk.
“There is definitely a slowdown taking place in the market,” said Robert Carter at market research firm NPD.
Overall Canadian restaurant sales were flat in the quarter, and part of the slowdown at quick- service restaurants was due to flat sales in the busy morning hours around breakfast, which had been the fastest- growing part of the day for quick service restaurants in Canada for more than a year.
“There was no continued growth, and that would have a big effect on Tim Hortons’ same- store sales,” Carter said. But performance was robust at Starbucks, Carter added.
McDonald’s delivered another blow by introducing all-day breakfast in this country. Industry sales in the afternoon snacking period were up five per cent, according to Carter. “I would attribute that to the launch of all- day breakfast at McDonald’s and that would be having an impact on ( the snack business) Tim Hortons.”