Tim’s sales miss an­a­lyst ex­pec­ta­tions

The Peterborough Examiner - - BUSINESS - MICHAEL LEWIS

Restau­rant Brands In­ter­na­tional Inc. is blam­ing weak­ness in the cold bev­er­age and lunchtime sand­wich cat­e­gories for a sur­prise drop in com­pa­ra­ble store sales at its Tim Hor­tons restau­rant chain, which in 2018 un­veiled a sweep­ing plan to im­prove prof­itabil­ity for fran­chise own­ers.

Toronto-based RBI on Mon­day said Tim Hor­tons’ same store sales posted a 1.4 per cent an­nual de­cline in the third quar­ter ended Sept. 30 ver­sus an­a­lyst fore­casts for a 0.93 per cent uptick — and nine per cent same store sales growth across the com­pany. RBI’s other prop­er­ties, Popeyes and Burger King, beat ex­pec­ta­tions and Tim Hor­tons, which ac­counts for about 60 per cent of Restau­rant Brands’ to­tal rev­enue, was again the lag­gard.

Tim Hor­tons seems to be slower to adapt amid in­creas­ing com­pe­ti­tion from global cof­fee houses, Pa­cific Man­age­ment Con­sult­ing Group an­a­lyst John Gor­don said in a note to in­vestors. The com­pany has been spruc­ing up its Tim Hor­tons out­lets and adding new cof­fee and lunch of­fer­ings, while rolling out break­fast sand­wiches with Be­yond Meat’s plant-based sausages in se­lect Cana­dian cities, but it ap­pears those ef­forts have yet to bear fruit. Tim Hor­tons re­moved Be­yond Meat burg­ers from its menu in Sep­tem­ber, two months af­ter in­tro­duc­ing the al­ter­na­tive-protein prod­uct on a trial ba­sis at most of its nearly 4,000 lo­ca­tions across the coun­try.

“We saw some ini­tial ex­cite­ment around the prod­uct. But we launched it as a lim­ited-time of­fer and when that win­dow ran we de­cided it was best to take it off the menu and maybe con­sider other al­ter­na­tives down the road,” said RBI CEO Jose Cil.

Dur­ing the third quar­ter, mean­while, the plant-based Im­pos­si­ble Whop­per pro­pelled Burger King to its best com­pa­ra­ble sales in­crease in four years, while Popeyes saw sales boom amid a chicken sand­wich craze.

Fac­ing fall­out from neg­a­tive me­dia cov­er­age gen­er­ated by a group of dis­si­dent fran­chise own­ers, and calls from some quar­ters for more in­no­va­tive prod­uct of­fer­ings, Tim Hor­tons in April 2018 launched its “Win­ning To­gether” plan to im­prove the cus­tomer ex­pe­ri­ence. The plan in­cludes pro­mo­tion of the Tim Hor­tons app, a new mar­ket­ing cam­paign ex­tolling the virtue of con­nect­ing with neigh­bours over a cof­fee, and ren­o­vat­ing restau­rants.

On an earn­ings con­fer­ence call, how­ever, Bar­clays an­a­lyst Jef­frey Bern­stein sug­gested some im­pa­tience with the plan’s progress. “At what mile­stone will you ques­tion the con­fi­dence of the Win­ning To­gether plan?” he asked Cil, who re­sponded by say­ing, “We re­main ex­tremely con­fi­dent with the Win­ning To­gether plan. These things [don’t] hap­pen quar­ter over quar­ter. It takes time.”

In its earn­ings re­port, RBI posted a nearly five per cent year-over-year in­crease in same store sales at Burger King lo­ca­tions in the U.S., cred­it­ing the launch of the Im­pos­si­ble Whop­per for the im­prove­ment. Burger King an­nounced in Au­gust that it would start sell­ing the plant-based ver­sion of its sig­na­ture burger na­tion­wide af­ter a suc­cess­ful test run in seven mar­kets. It had started sell­ing the soy-based burg­ers, which are made by Im­pos­si­ble Foods, in April.

RBI also said that Popeyes had com­pa­ra­ble sales growth of more than 10 per cent in the U.S., one of its best quar­ters in al­most two decades.

The chain of­fered a chicken sand­wich over the sum­mer and an­nounced Mon­day that the Popeyes Chicken Sand­wich will be back on its menus on Sun­day.

Restau­rant Brands re­ported over­all rev­enue grew six per cent to $1.46 bil­lion (U.S.) last quar­ter, up from $1.38 bil­lion dur­ing the same pe­riod last year.

Strong per­for­mances from Burger King and Popeyes helped off­set weak­ness at Tim Hor­tons.

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