Tim Hortons sales strength a 'template' for success in Canada's economy: RBI CEO
Shares of Tim Hortons’ parent company rose on Thursday as Restaurant Brands International (QSR.TO)(QSR) hailed strong sales at the coffee and doughnut chain as a "template" for success in a tough economy. Executives say Tim Hortons holds the key to improving slowing sales at its Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs restaurants.
The Toronto-based company, which reports its financials in U.S. dollars, booked US$399 million in profit in the second quarter, up from US$351 million a year ago. Sales totalled US$2.08 billion, a 17 per cent improvement year-over year.
Once again, Tim Hortons was RBI’s strongest brand, with comparable sales rising 4.6 per cent for the three months ended June 30. Meanwhile, sales at its burger, chicken, and submarine sandwich businesses stayed virtually flat by this key retail industry metric, which excludes recently opened locations.
RBI chief executive Joshua Kobza says the strong quarterly sales at Tim Hortons are especially noteworthy "given the overall economy in Canada right now."
“Tim’s performance has really been remarkable,” he said Thursday on a post-earnings call with analysts. “Even in a somewhat challenging consumer environment, they’re outperforming the industry by a wide margin, and they’ve been doing it consistently for a long time.”
Toronto-listed RBI shares closed 1.91 per cent higher on Thursday at $98.82, after rising as much as 3.9 per cent earlier.
Kobza says Tim Hortons in Canada continues to grow its market share in its core coffee, baked goods, and breakfast offerings, while grabbing a larger slice of the afternoon and evening category. In April, he hailed the chain’s launch of flatbread pizza as “the largest and most successful in recent history.”
On Thursday, he pointed to strength in cold beverages, which now represent nearly 40 per cent of total drink sales, as well as value offerings like $3 breakfast sandwiches with the purchase of a coffee.
By contrast, Kobza says sales at Burger King were “clearly softer than we aspire to,” with sales at Popeyes and Firehouse reflecting the impact of increasingly cost-conscious consumers.
“We clearly saw softer-than-expected sales across our businesses in Q2, and it’s not yet clear when we will see the category strengthen,” RBI executive chairman Patrick Doyle told analysts on the call.
Since 2020, Tim Hortons in Canada has followed a “back-to-basics” strategy, focused on simple improvement to staples like coffee and breakfast items, while offering better value for customers.
“What builds a great restaurant business is continually improving your food, improving your servings, making your restaurants look great, and having a great relationship with terrific, motivated franchisees,” Kobza said. “We’re seeing that with Tims, and it's frankly the template for success elsewhere for us.”
At RBI’s investor day in February, the company said it expects comparable sales above three per cent from 2024 to 2028, and systemwide sales of over eight per cent. In the second quarter, those measures stood at 1.9 per cent and five per cent, respectively.
"While 2024 will be a softer systemwide sales growth year than our long-term outlook, our business is incredibly resilient, and our balance of strategic investments and history of cost discipline allow us to successfully navigate short-term consumer pressures and not overreact to one or two quarters of softer sales," Kobza said.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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