A Popeyes fast food chain restaurant is seen on August 30, 2019 on a street of Washington D.C.
Eric Baradat | AFP | Getty Images
But Popeyes, which has become the gem of Restaurant Brands’ portfolio, reported same-store sales growth of 24.8%, powered by its popular chicken sandwich.
Shares of the company fell 2% in morning trading. The stock, which has a market value of $26 billion, has fallen 11% so far this year.
Here’s what the company reported for the quarter ended June 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 33 cents, adjusted, vs. 31 cents expected
- Revenue: $1.05 billion vs. $1.05 billion expected
The Burger King parent reported second-quarter net income of $163 million, or 35 cents per share, down from $257 million, or 55 cents per share, a year earlier.
Excluding items, Restaurant Brands earned 33 cents per share, beating the 31 cents per share expected by analysts surveyed by Refinitiv.
Net sales dropped 25% to $1.05 billion, meeting expectations. Digital sales soared 120%, more than double from the year-ago period.
Tim Hortons, which typically contributes about 60% of Restaurant Brands’ total revenue, saw its same-store sales plunge 29.3%. Even before the pandemic, the Canadian coffee chain struggled as sales growth in its domestic market slowed down. Now as the virus changes consumer behavior, chains from Starbucks to Taco Bell are reporting that fewer customers are stopping by for breakfast or their early morning java. Tims’ same-store sales were still down by the mid teens by the end of July.
A year ago, Popeyes was also experiencing stagnating same-store sales growth. Then its chicken sandwich launched in August, reigniting sales and selling out of its initial supply weeks ahead of schedule. In the second quarter this year, its same-store sales soared by nearly 25%, thanks in part to the popular item.
Executives said that Popeyes saw growth across all of its menu categories. Its sales continued to pick up throughout the quarter and into July. As of the end of July, its same-store sales were up by high twenties.
Burger King reported same-store sales declines of 13.4%. The burger chain’s U.S. same-store sales shrank by 9.9% during the quarter. Restaurant Brands said that sales are improving since hitting a low point in March, and as of the end of July, its same-store sales were unchanged from a year ago.
About 93% of Restaurant Brands’ locations have reopened globally. Substantially all of its restaurants in North America and Asia Pacific are open. In Europe, the Middle East and Africa, only about 10% of locations are shuttered temporarily, and about 20% of Latin American restaurants are still closed. About a third of dining rooms have reopened in the three chains’ domestic markets.
The company excludes a location from its monthly same-store sales calculations if it’s been closed for a significant portion of that month.
CEO Jose Cil told analysts that he expects net restaurant growth to be flat for the year. While the company plans to open new locations, it will also be closing more than usual.
The permanent closures will affect both domestic and international markets, but Cil did not elaborate on which brands will be most affected. CFO Matt Dunnigan said that the closures would be relatively small, representing just a “few percentage points” of its global footprint and system-wide sales.
Restaurant Brands said it can’t predict the future impact of the virus on its business or when it will resume normal operations, but it does expect Covid-19 to weigh on its third-quarter results.
The company also said that it has fully paid down the $1 billion revolving credit facility it drew down on in mid-March, amid uncertainty about the credit markets as the crisis unraveled.
Restaurant Brands said Thursday that it has notified the Toronto Stock Exchange of its plans to renew authorization for its buyback program. Many companies have suspended buyback programs in response to the pandemic and ensuing crisis.