By Ilan Brat
The newly created parent of Burger King and Tim Hortons posted a
sharp increase in quarterly sales, the latest sign of a recovery
taking hold across much of the North American fast-food
industry.
Systemwide sales rose 7.7% at Burger King and 7.4% at Tim
Hortons in the fourth quarter of last year, Restaurant Brands
International Inc. reported in the company's first earnings results
since the merger of the two brands closed. That reflected solid
growth in existing restaurants and the addition of new outlets.
Executives at Restaurant Brands, Oakville, Ontario, said
advisers' fees combined with other expenses related to Burger
King's $11 billion acquisition of Canadian coffee-and-doughnut
chain Tim Hortons last year propelled an overall net loss in the
fourth quarter of $514.2 million, or $2.52 a share, on revenue of
$416.3 million. Still, some the combined company's measures of
profit increased.
Burger King's strong sales growth contrasts with the struggles
at McDonald's Corp., its biggest U.S. rival. McDonald's last week
said global same-store sales fell 1.8% in January, though U.S.
sales edged up 0.4%. McDonald's last month named a new chief
executive and reported a 21% drop in fourth-quarter earnings as it
continued to grapple with shifting U.S. consumer tastes and fallout
from missteps, including a bloated menu that slowed service.
More broadly, a gathering economic recovery in the U.S.,
bolstered by a decline in gasoline prices that has left consumers
more cash for other spending, is driving some recent strength in
the restaurant industry, benefiting chains from Chipotle Mexican
Grill Inc. to Sonic Corp. Overall, food-services retail sales rose
0.8% in January from the prior month and climbed 11.3% from a year
earlier, compared with 3.3% annual sales growth across all
retailers, according to the Commerce Department.
Burger King's sales at restaurants in the U.S. and Canada open
at least a year increased 4.2% in the quarter, compared with growth
of 0.2% in the fourth quarter of 2013. That comes despite the
closure of 30 outlets in the two countries since late 2013,
bringing its total 7,406 in the region. Comparable-store sales grew
4.1% in the latest quarter at Tim Hortons, whose restaurants are
almost entirely in Canada and the U.S., compared with 1.8% growth a
year earlier.
"When you look at the results for both brands....[it] speaks to
the iconic status of both brands and really why we want to own both
of these brands for the long term," said Restaurant Brands Chief
Executive Daniel Schwartz, who previously had been Burger King's
CEO.
Mr. Schwartz said that Burger King and Tim Hortons, which
maintained separate management after the merger, are focused on
growing franchisees' profitability and boosting expansion outside
home markets to spur sales growth. Starting late last year, more
than half of Burger King's outlets were outside the U.S. for the
first time, he added.
Tim Hortons, with 80% of its 4,671 total restaurants in Canada,
lately has been adding restaurants in the Middle East while Burger
King, with a total 14,372 restaurants world-wide, recently launched
10 stores in India, the company said.
Restaurant Brands said earnings before interest, taxes,
depreciation and amortization adjusted for the impact of
share-based compensation and other expenses, a key operating
metric, grew 2.8% to $397.7 million in the quarter ending Dec. 31
compared with the prior-year period. The company didn't break out
net income excluding the merger transaction costs.
Though the company recently announced it would lay off about 350
people in its Tim Hortons division, Restaurant Brands executives
said the cost cuts weren't the driving factor behind the
acquisition. Instead, executives said they hoped to use what they
have learned through boosting Burger King's international presence
to augment the pace of Tim Hortons's global expansion.
"If you go back in history, people who bet on global expansion
did pretty well," Mr. Schwartz said.
Judy McKinnon contributed to this article.
Write to Ilan Brat at ilan.brat@wsj.com
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