Burger King and Tim Hortons both grew same-store sales and added new units globally in their first year operating under a combined company, Restaurant Brands International Inc. said on Tuesday.
Burger King’s same-store sales grew 3.9 percent in the fourth quarter ended Dec. 31, while full-year same-store sales grew 5.4 percent. The chain added 631 locations.
Tim Hortons, meanwhile, reported 6.3-percent same-store sales growth in the quarter, 5.6 percent for the year and added 155 locations.
“We’re pleased with the results across both of the brands,” Daniel Schwartz, CEO of Restaurant Brands International, said on the company’s earnings call Tuesday morning. “We couldn’t ask for a better year for both brands under Restaurant Brands International ownership.”
That said, Tim Hortons closed 27 underperforming restaurants in New York and Maine. Combined, the locations represented about $14 million in system sales, company executives said — for average unit volumes of just more than $500,000, or less than half of Tim Hortons’ U.S. unit volumes.
Executives said that the closures would enable the company to refocus its resources on markets where it is setting up partnerships with large-scale franchisees.
Restaurant Brands International was created in 2014 when 3G Capital, controlling shareholder at Burger King, engineered an $11 billion deal in one of the biggest deals in restaurant industry history.
The potential in that deal lies with the expansion of Tim Hortons, in the U.S. and internationally. And indeed, the company has signed a pair of recent development deals in Ohio and on Tuesday announced a deal with the Luke Family of Brands to develop the coffee and doughnut chain in Indiana.
“We’re focused on identifying key markets and finding the right partners to develop Tim Hortons in those markets,” Schwartz said. “We continue to be very excited about the growth opportunity for Tim’s in the U.S.”
Burger King, meanwhile, saw its unit count grow past 15,000 locations worldwide following its unit count growth in 2015. It has also remodeled more than half of its locations in the U.S.
The company’s same-store sales grew 5.7 percent for the year in the U.S. and Canada, including 2.8 percent in the fourth quarter, a quarter in which the chain was up against difficult comparisons from a year ago.
It was also up against difficult competition, as both The Wendy’s Co. Inc., and McDonald’s Corp. saw same-store sales grow in the period by more than 5 percent. Wendy’s same-store sales grew on the back of a 4-for-$4 value deal and McDonald’s thanks to all-day breakfast.
The same-store sales performance at Burger King continues that chain’s momentum, which has seen its average unit volume grow from $1.1 million at one point to $1.3 million last year.
Still, that remains far lower than either Wendy’s or McDonald’s. “We feel we have a long way to go in the U.S.,” Schwartz said. “We’re excited for the prospect of growing restaurant sales.”
Stock in Restaurant Brands International had fallen to new 52-week lows in recent weeks amid general weakness in restaurant stocks and likely a belief that McDonald’s would retake share in the new year. But its stock was up nearly 5 percent in morning trading.
When asked about the impact of all-day breakfast on Burger King’s sales, Schwartz wouldn’t comment on competitors. “What’s important is we have a strategy for each brand,” he said. “None of that changes regardless of the competitive environment.”
Nor would Schwartz discuss the impact of low gas prices — which, theoretically, could have helped quick-service restaurant sales, including those at both of RBI’s brands, in the fourth quarter. “That’s tough to quantify,” he said.
Executives on the call said that the company is intent on increasing its digital efforts at both brands in the coming months. “We brought in a team of top, talented engineers to help us develop our digital platform across both brands,” Schwartz said. “It’s definitely a top priority. We made a significant investment.”
For the year, systemwide sales at Burger King grew 1.7 percent, to $17.3 billion from $17 billion. At Tim Hortons, systemwide sales fell 4 percent to $6.35 billion from $6.6 billion.
Both numbers, however, were weaker than normal due to the impact of the strong dollar, executives said.
Revenue and profit comparisons are difficult because of the 2014 combination of Tim Hortons and Burger King.
Net income was $51.7 million, or 25 cents per share, in the quarter, up from a loss of $3.1 million or 2 cents per share at the two brands a year ago. For the year, net income was $103.9 million, or 50 cents, up from a loss of $166.6 million or 82 cents for the two brands in 2014 before the combination.
Revenues in the quarter fell 3.2 percent against the two brands a year ago to $1.06 billion from $1.09 billion. For the year, the company recorded $4.1 billion in revenues, down 3.5 percent from 2014.
Contact Jonathan Maze at [email protected]
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