Weak sales a drip on Tim Hortons profit
Parent company reports profit drop as pandemic makes mark on snacking
The COVID-19 pandemic is putting Canadians off their morning doughnuts and coffee.
Sales at Tim Hortons were more than 40 per cent lower than usual in the last two weeks of March, parent company Restaurant Brands International said as it announced its first quarter earnings Friday.
“Breakfast, snacking and other routine-based (sales) have been disproportionately impacted across all of our businesses, and this dynamic is clearly illustrated by our results at Tim’s and our coffee-oriented competitors across North America,” said RBI CEO Jose Cil in a conference call with analysts.
The company said daily sales were down by a percentage “in the mid-40s” in the last two weeks of March, and said they were down “in the high 30s” in April.
RBI, which also owns Burger King and Popeyes, saw earnings drop to $224 million (all figures U.S.) in the first quarter, from $246 million in the same period last year.
Revenue also fell to $1.23 billion, down from nearly $1.27 billion in the first three months of 2019.
Still, while revenue is down, Tim’s is still probably in a better position to keep customers than some of its competitors, including Starbucks, because of its long-standing experience with drive-through windows, said retail consultant Lisa Hutcheson.
“There’s a huge fear factor about actually going into places. So I think the drive-through is definitely an advantage,” said Hutcheson, managing partner at retail consultancy J.C. Williams Group.
The company said roughly 85 per cent of its restaurants in North America — including Tim’s, Burger King and Popeyes, are still open.
“So many more of their stores have drive-through, and Tim’s just has more of a drivethrough culture, so I think that’s one reason why so many of their stores have stayed open,” said Hutcheson.
RBI chief commercial officer Duncan Fulton said the drivethrough windows have been a boon.
“In ordinary times, I don’t think people saw it as an unusually valuable sales channel, but now, Canadians are having a renewed appreciation for the convenience and safety drivethrough provides. We’ve had them around for more than 40 years,” said Fulton.
RBI said profits for Tim’s store owners took a hit during the quarter, but Cil pointed to several measures designed to soften the COVID-19 blow for franchisees. Among them are putting off scheduled renovations, as well as making rent for most stores strictly a percentage of sales. Franchisees whose locations are owned by the company typically have a fixed rent, along with a share of sales revenue.
The company maxed out a line of credit of $1 billion to give itself some more wiggle room to get through COVID-19. RBI also issued $500 million in five-year bonds at the end of the first quarter.
“Given the considerable uncertainty surrounding COVID-19, we are pleased to strengthen our balance sheet even further,” said company CFO Matt Dunnigan on the conference call.
“As a result of these actions, we are confident we have the resources and flexibility needed to manage through this crisis, and emerge on the other side even stronger,” Dunigan added.