Restaurant Brands International missed market estimates for quarterly sales on Friday as still-high inflation pressured consumer spending at its Burger King chain, sending shares down nearly 5% in early trading.
Weaker household budgets are forcing some customers to cut back on restaurant food and instead rely on cheaper, home-cooked meals, a trend that has dented traffic across the US restaurant industry over the past few months.
The Popeyes owner's dour sales contrast a strong third-quarter performance from rival McDonald's, which has been doubling down on menu upgrades, promotions and pricing - eroding market share at Burger King and other chains.
"The quarter was a mixed bag... maybe expectations were a little bit too high (for Burger King)... but they have to figure out a way to compete with the McDonald's of the world," said Sante Faustini III, director of product intelligence at M Science.
Burger King's total same-store sales growth of 7.2% missed analysts' estimates of 8.71%, according to LSEG data.
Still, menu items like the Royal Crispy wraps and Whopper Nuggets are helping increase visits to Burger King, company executives said on a post-earnings call.
Footfall at US locations was flat in the quarter, an improvement from several quarters of traffic declines seen so far, they said.
Burger King's $400 million (€373 million) turnaround plan was progressing well so far, but "there is still a lot more we can do to accelerate development, drive traffic and grow franchisee profitability", said executive chairman Patrick Doyle.
A let-up in some commodity costs helped Canada-based Restaurant Brands post an adjusted profit of 90 cents per share, above expectations of 86 cents, even as it invested heavily in advertising, restaurant technology and labor.
Its Canada-focused Tim Hortons chain also recorded better-than-expected comparable sales growth of 6.8%, as the brand's coffees, new cold drinks and breakfast sandwiches attracted more customers.
Total revenue at the company rose 6.4% to $1.84 billion (€1.71 billion) for the quarter ended Sept. 30. Analysts had estimated $1.87 billion (€1.74 billion).