RBI shares jump de­spite flat sales growth

Ottawa Citizen - - FP - HOL­LIE SHAW Fi­nan­cial Post hshaw@na­tion­al­post.com

Ex­ec­u­tives at the op­er­a­tor of Tim Hor­tons sounded an upbeat note about the brand Mon­day de­spite slower than an­tic­i­pated store growth for the cof­fee and dough­nut chain across North Amer­ica, weak same-store sales on its home turf and an ugly spat with its fran­chisees.

The Tim Hor­tons brand was en­gulfed by neg­a­tive pub­lic­ity last month af­ter some of its On­tario fran­chisees cut em­ployee ben­e­fits and paid breaks in re­sponse to the prov­ince’s min­i­mum wage hikes. At the time, its owner Restau­rant Brands In­ter­na­tional (RBI) Inc. said the ac­tions did not re­flect the brand and blamed a “rogue group” of fran­chisees.

It fol­lowed a year of an­tag­o­nism with Tim Hor­tons’ Canadian fran­chisees, who formed an as­so­ci­a­tion and filed class ac­tion law­suits against the mas­ter fran­chisor, ac­cus­ing head of­fice of mis­us­ing ad­ver­tis­ing funds and hik­ing the prices of prod­ucts they buy through the com­pany such as sugar and ba­con.

In an in­ter­view Mon­day, RBI chief ex­ec­u­tive Daniel Schwartz would not com­ment on whether on­go­ing fran­chisee is­sues had weighed down the com­pany ’s rep­u­ta­tion or share price per­for­mance.

“We made a lot of good progress last year in build­ing a strong and pos­i­tive agenda with the restau­rant own­ers,” Schwartz said. “We think the brand and the busi­ness are both healthy.”

RBI shares jumped seven per cent in Toronto af­ter the com­pany re­ported net earn­ings of US$395 mil­lion in the pe­riod ended Dec. 31, or US$1.59 per share, com­pared with US$118.4 mil­lion (US50 cents) in the same pe­riod a year ago. Ad­justed earn­ings were US66 cents, com­pared with US44 cents last year, beat­ing an­a­lyst es­ti­mates of US57 cents from Thom­son Reuters. The shares ended the day at $75.48, up 6.18 per cent.

Rev­enue was US$1.2 bil­lion, up from US$1.1 bil­lion a year ago.

Com­pa­ra­ble sales, an im­por­tant mea­sure of sys­tem health that tracks vol­ume at lo­ca­tions open for at least a year, were mixed, up 0.1 per cent at Tim Hor­tons for the quar­ter, 4.6 per cent at Burger King, and down 1.3 per cent at Pop­eye’s.

But Tim Hor­tons’ com­pa­ra­ble sales slid 0.1 per cent for the full year, the fifth straight quar­ter of flat or fall­ing same-store sales at the cof­fee chain.

Over­all sys­tem-wide sales at Tim Hor­tons rose 2.4 per cent to US$1.75 bil­lion, but were far more ro­bust at the rapidly-ex­pand­ing Burger King and Pop­eye’s, ris­ing 12.3 per cent and 6.8 per cent, re­spec­tively.

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