Burger King Follows McDonald’s With Sales Abroad Beating U.S.
It’s not just Big Macs that aren’t selling well in America. The Whopper is struggling, too.
Restaurant Brands International Inc., owner of the Burger King and Tim Hortons chains, followed McDonald’s Corp. in posting better sales in international markets last quarter while its U.S. business suffered from a broader industry slowdown.
Burger King’s same-store sales dropped 0.5 percent in North America in the third quarter, trailing analysts’ projections that they’d rise by that same percentage. Meanwhile, the chain’s results topped expectations in all of its international units, including strong performances in Brazil, Argentina and China.
The results suggest that Burger King’s business in the U.S. is suffering from the same malaise that’s weighing on its larger competitor. Unsettled by the turbulent election season and the shaky economy, Americans are eating out less frequently. And cheaper grocery prices are making it more affordable to cook at home.
“There was some softness in the industry,” Restaurant Brands Chief Executive Officer Daniel Schwartz said during an interview. “There is this food-at-home deflation phenomenon that’s going on now.”
The stock fell as much as 3.7 percent to $45.26 in New York on Monday. Through last week, Restaurant Brands has gained 26 percent this year.
Restaurant Brands fared better outside of its North American home base. Globally, Burger King’s same-store sales rose 1.7 percent, excluding the effect of exchange-rate fluctuations, the Oakville, Ontario-based company said Monday in a statement. That topped analysts’ projections for a 0.7 percent gain, according to Consensus Metrix.
The chain’s comparable sales climbed 5.3 percent in its Asia Pacific unit, 9.5 percent in Latin America and the Caribbean, and 2.6 percent in Europe, the Middle East and Africa.
Burger King is seeing particularly strong results in China, where it has about 500 restaurants, Chief Financial Officer Josh Kobza said. The company offers delivery there, and is pleased with it so far, he said.
China is becoming “a large contributor to our overall results,” Kobza said.
That strength helped profit rise to 43 cents a share, excluding some items, which beat analysts’ 40-cent average estimate. Total revenue rose to $1.08 billion, also exceeding analysts’ projections.
Domestically, Burger King has been advertising deals such as 10 chicken nuggets for $1.49, and new foods including a Whopper burrito with queso sauce. It also has been embracing its indulgent image and partnering with other well-known brands to draw diners. This summer, the chain began selling deep-fried sticks of macaroni and cheese encrusted in Cheetos-flavored breading. The Whopper seller worked with PepsiCo Inc.’s Frito-Lay snack empire on the item.
The Tim Hortons coffee-and-doughnut chain also fared better abroad during the quarter. International same-store sales jumped 8.4 percent, outpacing its 2 percent gain overall.
Since Burger King bought Tim Hortons in 2014, the chain has been accelerating growth abroad to help drive sales. In August, it said it would be pushing into the U.K. through a master-franchise joint venture. Globally, Tim Hortons has about 4,500 locations, while Burger King has more than 15,000.
Closer to home, Tim Hortons is focused on expanding into new U.S. territories and adding stores in markets such as Minneapolis and Cincinnati.
“We think the Tim Hortons brand should be everywhere in the U.S.,” Schwartz said. “We’re always focused on finding new markets.”
News by Bloomberg, edited by Hospitality Ireland