COFFEE HELPS CROWN THE KING
Profits jump at Restaurant Brands International, with its new Tim Hortons division boosting revenue,
Thanks to grilled wraps and chicken fries, the profits keep rolling in at Restaurant Brands International Inc. almost a year after Burger King took over Tim Hortons.
Shares of the chains’ new owner soared 6 per cent Tuesday after it reported getting a nice jolt in the third quarter from Tim Hortons’ new Creamy Chocolate Chill iced drink along with the continued popularity of its dark roast coffee, which it introduced just prior to last December’s surprise $12.5-billion takeover.
As part of the parent company’s promise from the outset to push the Tim Hortons brand in the U.S., the restaurant giant announced it has inked its first big partnership deal to build 150 new locations in the Cincinnati area over the next decade. Tim Hortons already has 859 stores in the U.S.
Chief executive Daniel Schwartz vowed to continue to “aggressively pursue” expansion in the crowded American coffee market the way it did across the globe when Brazilian investment firm 3G Capital, Restaurant Brands’ majority shareholder, scooped up Burger King in 2010.
Since then it has opened 2,000 more restaurants, mainly across Europe and China.
“There’s so much opportunity in the world for us to be developing at Tim Hortons,” Schwartz noted.
But he said the coffee chain’s new owner isn’t finished growing the business in the seemingly saturated Canadian marketplace, where it is already the largest seller of coffee and baked goods by far with 3,879 locations.
“We’re still growing at quite a healthy pace (in Canada). We don’t see ourselves slowing down any time soon,” Schwartz told analysts on a conference call.
Tim Hortons opened 69 new stores in the third quarter and has plans to expand further in nontraditional spots such as hospitals, schools and office towers, he said. Overall, Schwartz said, the company has so far “set a strong foundation over the first year of Restaurant Brands International.”
Though the newly combined company navigated the fallout of a weaker Canadian dollar, it reported profit grew to $49.6 million (U.S.) or 24 cents per share in the period.
Same-store sales in Tim’s locations open more than a year rose 5.3 per cent compared to the same quarter in 2014, when the coffee chain was still a stand-alone entity.
Meanwhile, Burger King’s new fiery chicken fries and extra long jalapeno cheeseburger also fuelled a sales increase of 6.2 per cent, the company said.
Comparable results last year if they had already been merged would have been $46.1 million net income or 23 cents per share.
“(The results) are really driven more than anything else by running great restaurants,” Schwartz told The Canadian Press. “It’s kind of simple to describe but tough to execute.”
Adjusted net income was $162.7 million, or 34 cents per share. Restaurant Brands had $1.02 billion of revenue in the third quarter, a decline from last year as currency fluctuation took a bite out of Tim Hortons’ results.
Tim Hortons contributed $737.7 million of revenue, which was down from $834.1 million a year earlier — mainly because of the impact of a weaker Canadian dollar.
The currency fluctuations also have an impact on the prices that Tim Hortons pays suppliers for coffee beans, but the company says it is not planning to raise drink prices in the near term.
Meanwhile, at Burger King, revenue grew 11.2 per cent to $282 million.
Restaurant Brands has drawn customers to Burger King with specials and promotions.