(Reuters) - Restaurant Brands International Inc (QSR.TO) (QSR.N), owner of Burger King and the Tim Hortons coffee and doughnut chain, reported lower-than-expected quarterly sales growth at established stores as U.S. consumers reduce spending on eating out.
U.S.-listed shares of Restaurant Brands, which reported a better-than-expected profit for the second quarter on lower costs, were up 2 percent in early afternoon trade. They fell as much as 2.2 percent earlier in the day.
A fall in grocery prices is deterring consumers from eating out. Restaurants, on the other hand, have not been able to cut prices, despite the fall in food prices, given the high costs of complying with minimum wage increases.
Total comparable sales at Burger King rose 0.6 percent in the quarter ended June 30, compared with 6.7 percent a year earlier.
“The softness in the U.S. market is disappointing given the initially positive reaction to menu changes and the introduction of hot dogs,” Neil Saunders, CEO of retail research firm Conlumino, wrote in a note.
Burger King introduced products such as Chicken Rings and Mac ‘N Cheetos in the United States and Canada in the quarter.
“Restaurant Brands needs to up the pace of innovation if it is to grow further,” Saunders said.
Comparable sales at Burger King fell 0.8 percent in the United States and Canada, lower than consensus of 1.1 percent growth, according to Stephens analysts.
The fall in North American sales was somewhat offset by growth in the company’s smaller markets - Asia Pacific and Latin America, both of which grew at about 5 percent.
Total comparable sales at Tim Hortons rose 2.7 percent, compared with 5.5 percent last earlier.
In Canada, the chain’s comparable sales rose 2.3 percent, missing expectations of 3.8 percent.
Second-quarter net profit attributable to Restaurant Brands’ shareholders jumped more than eight-fold to $90.9 million from a year ago, when the company recorded a $27.4 million charge related to the merger of Burger King and Tim Hortons.
Total costs and expenses fell 16.7 percent to $616.2 million.
On an adjusted basis, Restaurant Brands earned 41 cents per share, beating the average analyst estimate of 34 cents, according to Thomson Reuters I/B/E/S.
The Oakville, Ontario-based company’s revenue was nearly unchanged at $1.040 billion and slightly below analysts’ expectations of $1.045 billion.
Reporting by Anet Josline Pinto in Bengaluru; Writing by Swetha Gopinath; Editing by Maju Samuel