October 24, 2018 / 10:59 AM / 21 days ago

Restaurant Brands profit misses as Burger King fails to deliver

(Reuters) - Restaurant Brands International Inc’s (QSR.TO) quarterly profit fell short of analysts’ estimates on Wednesday as its Burger King unit struggled in a fiercely competitive U.S. market and sales growth at Tim Hortons cafes remained sluggish.

Burger King logo is seen in a restaurant in a communist-era building in Warsaw, Poland October 2, 2017. REUTERS/Kacper Pempel

The first steps in a C$700 million revamp of Hortons - a Canadian icon that now has more than 800 U.S. outlets - saw same-store sales grow 0.6 percent in the third quarter, double that a year earlier and up from a flat performance in the preceding quarter.

But that remained slow and analysts said both Burger King and Hortons faced entrenched issues in a North American fast-food market that is bristling with competition from McDonald’s Corp (MCD.N) and Yum Brands Inc’s (YUM.N) Kentucky Fried Chicken.

Burger King’s U.S. same-store sales declined 0.7 percent, compared with an increase of 4 percent a year ago, while McDonald’s reported a 2.4 percent growth on Tuesday.

Neil Saunders, an analyst with GlobalData Retail, said while Burger King’s advertising campaigns paid off, the results had not proved durable and growth was “sluggish”.

“The comparable figures from Burger King are particularly disappointing given the number of strong promotions and campaigns that the chain has run,” he said. “Burger King clearly needs to get better at driving more regular traffic.”

He said moves to renovate cafes, introduce online ordering and offer anytime breakfast bode well for Hortons, but noted the chain would soon be facing the effects of Dunkin’ Brands (DNKN.O) recently announced revamp.

McDonald’s has profited from a years-long program of renovations at its international restaurants and Restaurant Brands Chief Executive Officer Daniel Schwartz unveiled plans for a similar U.S. program at Burger King.

A new “Garden Grill” design aims to make restaurants feel more upmarket, bedecked with warm wooden tables and decor, plants and modern ordering kiosks that will follow in the footsteps of the touch screens introduced by McDonald’s.

“This is a step in the right direction as it comes at a time when other chains are also improving their images and turning restaurants into places where people can linger and enjoy their time,” Saunders said.

On an adjusted basis, Restaurant Brands earned 63 cents per share, compared with analysts’ average estimate of 65 cents, according to Refinitiv data.

The company’s shares fell nearly 1 percent to C$73.94 on the Toronto Stock Exchange.

Reporting by Laharee Chatterjee in Bengaluru; Editing by Sriraj Kalluvila

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