On Tuesday, Restaurant Brands International (RBI) disclosed its third-quarter earnings, revealing a performance that disappointed investors and analysts alike. Earnings per share were reported at 93 cents on an adjusted basis, slightly lower than the 95 cents anticipated by analysts, while total revenue reached $2.29 billion, just shy of the expected $2.31 billion. The company’s latest figures indicate a stark decline in domestic same-store sales, falling short of Wall Street forecasts across all four of its major restaurant chains.
During the third quarter, RBI reported a modest global increase of only 0.3% in same-store sales. The results, however, highlighted significant declines for key brands such as Burger King, Popeyes, and Firehouse Subs within their home markets. While these numbers could indicate headwinds, the CEO, Josh Kobza, provided a glimmer of hope, suggesting that sales trends showed signs of improvement as the fourth quarter got underway.
Kobza expressed optimism on CNBC, noting that the initial data from October revealed positive trends, pointing to a low-single-digit increase in same-store sales. According to him, this positive trajectory could be attributed to successful marketing campaigns coupled with improving consumer sentiment in the U.S. economy. As he remarked, declines in gas prices, interest rates, and moderating inflation could be providing consumers with a bit more disposable income, potentially improving the overall spending on dining-out experiences.
Despite the optimism surrounding October’s early sales data, the challenges faced during the previous quarter are hard to overlook. For instance, Burger King’s same-store sales fell by 0.7%, a stark contrast to the anticipated flat performance. The franchise is currently undergoing significant changes to reignite growth in a landscape where consumers are increasingly discerning about where they spend their dining dollars.
The depth of the issues becomes clearer when looking more closely at individual brands. Popeyes saw its same-store sales decrease by a concerning 4%, far from the marginal growth analysts had expected. Recently, Popeyes has tried to adjust its value offerings to appeal better to the consumer base. Initiatives included promoting a three-piece bone-in chicken meal for just $5 and the reintroduction of its Big Box offering for $6. Despite these adjustments, the figures illustrate a challenging environment for the brand, making recovery efforts imperative to regain traction among consumers.
Firehouse Subs similarly felt the impact of this challenging quarter, with same-store sales declining by 4.8%, a significant gap compared to the predicted decrease of just 0.4%. As a newer addition to RBI’s portfolio, having joined in 2021 and holding a modest presence with 1,300 locations, this chain’s performance signals that it has much ground to cover in establishing its presence within the competitive fast-casual landscape.
In contrast, Tim Hortons emerged as a silver lining for RBI, showcasing a domestic same-store sales growth of 2.3%. However, this growth still lagged behind analysts’ expectations of a 4.1% increase. Tim’s success can be attributed to improvements in service speed and a boost in customer traffic. Nevertheless, disappointing figures from the other chains overshadow Tim’s performance.
On the international front, RBI’s same-store sales growth of 1.8% fell just short of estimates of 2.2%. In total, the company reported a net income of $252 million, maintaining earnings per share at 79 cents compared to the previous year. The acquisitions made earlier in the year—specifically targeting its largest U.S. Burger King franchisee and the Popeyes venture in China—significantly contributed to a 24.7% increase in net sales, yet the results from established brands bring forward questions about sustained growth.
As RBI navigates these tumultuous periods, the primary task remains the revitalization of its flagship brands to reinstate confidence with investors and patrons alike. The upcoming quarters promise to be crucial in determining whether the current upward trend continues or if the company will need to implement more aggressive strategies to maintain its foothold in an ever-competitive market.