A general view of a Tim Hortons Drive-Thru cafe and restaurant at Lakeside Retail Park on February 5, 2024 in Grays, United Kingdom.
John Keeble | Getty Images
International restaurant brands on Thursday reported quarterly earnings and revenue that beat analysts’ expectations, fueled by growth at its international restaurants and Tim Hortons.
Together, the two divisions account for about 70% of the company’s profits, according to CEO Josh Kobza.
Like many restaurants, the company has found that low- and middle-income consumers are spending less on meals in recent quarters. Diners didn’t change their behavior in the third quarter, but executives credited sticking to their strategy and avoiding so-called value wars for the company’s strong quarterly performance, particularly at Burger King’s U.S. restaurants.
“If you look at our results, we’re doing well despite some of these trends,” Kobza told CNBC.
Here’s what the company reported compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $1.03 adjusted vs. $1 expected
- Income: $2.45 billion versus $2.4 billion expected
Restaurant Brands reported third-quarter net income attributable to shareholders of $315 million, or 96 cents per share, compared with $252 million, or 79 cents per share, a year earlier.
Excluding transaction fees and other items, the company earned $1.03 per share.
Net sales increased 6.9% to $2.45 billion. The company’s same-store sales, which track this metric only for restaurants open at least a year, rose 4%.
Restaurant Brands’ international segment was the star of the quarter, with same-store sales growth of 6.5%. This beat StreetAccount’s consensus estimate of 4.4%. The company’s restaurants in Western Europe, China and Japan have fueled the segment’s same-store sales growth, Kobza told CNBC.
Tim Hortons reported same-store sales growth of 4.2%. The Canadian coffee chain is relying more on the food offering to stimulate sales and traffic in its restaurants. Executives also said an upgraded iced latte is boosting cold drink sales, which increased 10% during the quarter.
Burger King’s same-store sales rose 3.1%, showing the chain’s U.S. turnaround strategy is paying off. Burger King has focused on restaurant renovations and marketing based on core menu items like the Whopper to revive national sales. Renovated restaurants are also profitable for franchisees, increasing operators’ profitability, according to Burger King U.S. President Tom Curtis.
Looking ahead, the burger chain plans to look at “elevating product,” Curtis said in an interview.
“I think it’s important in an environment where there’s a lot of talk about lower inflation and lower costs. So for us, we’re going to zigzag while others zigzag,” he added.
Popeyes was the only Restaurant Brands division to report a decline in same-store sales. The chicken chain saw its same-store sales decline by 2.4%. In recent quarters, it has struggled to keep pace with its competitors, particularly when it comes to winning over value-conscious customers.
“I think what we want to focus on over the next few quarters is making even more progress operationally, in terms of the consistency of the customer experience that we provide across stores,” Kobza said.
Looking ahead, executives said Popeyes will also focus more on its core menu items after spending much of the last year pushing innovations, like bone-in chicken wings.