By Deborah Mary Sophia and Hilary Russ
(Reuters) -Restaurant Brands International Inc, beat estimates for quarterly results on Tuesday, boosted by higher prices and strong demand at its Burger King and Tim Hortons chains.
Comparable sales at the two brands jumped, as they invested in fresh advertising campaigns, and as more people returned to restaurants while continuing to place orders for delivery and carry out.
Shares, however, fell over 2% amid broader weakness in the restaurant industry, signaling that the upbeat report did little to alleviate investors’ concerns around labor and inflation pressures.
Costs for labor and commodities have spiraled due to the COVID-19 pandemic and war in Ukraine, forcing most restaurants to shield profits by raising menu prices.
Toronto, Ontario-based Restaurant Brands, which often caters to lower-income consumers, has hiked U.S. prices about 7 or 8% over the year, in line with broader inflation, Chief Executive Officer Jose Cil told Reuters in an interview.
The increases helped the company cushion a hit from a 3% decline in comparable sales at its Popeyes chain. The brand is facing staffing shortages and competition from rivals launching fried chicken sandwiches similar to the one it popularized with its 2019 rollout.
The price of a Popeyes’ crispy chicken sandwich at one New York City location jumped nearly 13% to $4.49 in late March, according to a Reuters review. It had been $3.99 since launch.
Even so, U.S. consumers pressured by higher gas and grocery prices have not started trading down to cheaper or fewer items or otherwise changing their behavior, Cil said.
“We’re well positioned to be stable if not grow in the most difficult of environments,” he said.
The company’s total revenue rose 15% to $1.45 billion in the first quarter ended March 31, topping Refinitiv estimates of $1.39 billion.
Comparable sales at Tim Hortons in Canada rose 10.1%, while Burger King global same-store sales jumped 10.3%, both beating analyst estimates.
The company took a $12 million hit – or 2.6% of its adjusted earnings – from Russia, where it suspended corporate support for its 820 franchised Burger King locations after Moscow’s invasion of Ukraine.
On March 17, Restaurant Brands said it was trying to dispose of its 15% stake in the joint venture that operates those restaurants.
However, there has been “no substantive progress since then,” Chief Corporate Officer Duncan Fulton told Reuters on Tuesday.
On an adjusted basis, Restaurant Brands earned 64 cents per share, also above estimates of 61 cents.
(Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York; Editing by Krishna Chandra Eluri, Shinjini Ganguli and Andrea Ricci)
