Restaurant Brands International Stays Confident Amid Tepid Q2’16 Sales And Fears Of Restaurant Industry Slump
Restaurant Brands International (NYSE: QSR), one of the last players in the quick service industry to report its earnings, missed the consensus estimate on revenues, making slight losses (-0.2% y-o-y). However, its non-GAAP EPS was in line with the consensus, growing by 37% year on year (y-o-y) to $0.41 per share.
The revenues at both Burger King (BK) and Tim Hortons (TH) stagnated, likely due to the weakening consumer sentiment amid economic and political uncertainties, and volatile oil prices. Further, the unfavorable foreign currency headwinds partially offset the growth in system-wide sales, knocking 4.2% off Tim Hortons’s revenue and 2% off Burger King’s. Despite softness, Restaurant Brands International (RBI) did see some comp sales growth at both BK (0.6%) and TH (2.7%), owing to impressive performance in Asia and Latin America.
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However, strict fiscal discipline, supported by a stronger dollar, helped the company cut its expenses by as much as 11% y-o-y in the quarter. Consequently, we saw tremendous gains in the company’s operating margin, which was up 7.1 percentage points to 40%.
Going Forward
- As the softness in the economy subsides, we can expect RBI to see growth in its top line.
- Further, innovative menu items like Mac n’ Cheetos, Oscar Mayer hot dogs, Egg-normous burrito and Chicken Fries Rings at BK, are likely to drive sales higher in the coming quarters.
- TH ended the second quarter with 4,464 restaurants, opening 26 net new restaurants during the period. Moreover, it established a master franchise joint venture with a company in the Philippines and Minnesota to develop the doughnut chain there. If the company stays on its target to expand Tim Hortons’s stores in the U.S., we can expect an impetus in its revenues in the long term.
- Stronger margins for TH as it converts more Variable Interest Entities (VIEs) to normal franchisee model and grows its higher margin retail business.
- In a separate statement, RBI said that it has approved $300 million in share repurchases over the next five years, signalling confidence in the brand despite a slump in the restaurant industry.
Have more questions on Restaurant Brands International (NYSE: QSR)? See the links below:
- Restaurant Brands International Q2 FY’16 Earnings Preview: Emphasis On Expansion To Be The Growth Strategy
- Franchised Restaurants To Contribute More Revenues Than That Of Company-Operated Restaurants For Restaurant Brands International By The Next 3 Years
- How Has Restaurant Brands International’s Revenue And EBITDA Composition Changed Over 2011-2015?
- By What Percentage Have Restaurant Brands International’s Revenues And EBITDA Grown Over The Last Five Years?
- Where Will Restaurant Brands International’s Revenue And EBITDA Growth Come From Over The Next Three Years?
- Restaurant Brands International Q1 FY’16 Earnings Preview: Breakfast Market To Drive Comp Sales
- What Is Restaurant Brands International’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
- What’s Restaurant Brands International’s Fundamental Value Based On Expected 2016 Results?
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