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Can chicken juice Burger King’s growth in its home market?

Shares of Burger King’s parent company Restaurant Brands International fell by the most in four and a half months on Wednesday after it reported disappointing comparable sales growth for the burger chain.

But company executives are hoping customers will come back to try a revamped crispy chicken sandwich among other new items as it battles arch-rival McDonald’s to rule the fiercely competitive US fast-food market. However it did not address whether it plans to counter McDonald’s aggressive price promotions with discounts of its own.

The company on Wednesday reported $1bn in revenue for the three months to March 31, compared to $918.5m in the same quarter a year ago. Analysts surveyed by Bloomberg had expected sales to come in at $989.4m.

Net income attributable to shareholders was nearly flat compared to the year-ago quarter, coming in at $50.2m versus $50m, while earnings per diluted share were 21 cents, behind the 32.6 cents Wall Street was looking for.

System-wide sales — which include sales from all restaurants, including newly opened ones — were up 6.2 per cent at Burger King, and 3.3 per cent at Tim Horton’s, the Canadian coffee-and-doughnut chain also under RBI’s umbrella. Comparable sale growth — a key industry metric that compares year-over-year sales at restaurants open at least 13 months — were a disappointment, however, falling 0.1 per cent at both chains.

In its home US market, also its largest, Burger King’s comp sales growth slid even further, down 2.2 for the quarter. McDonald’s, by contrast, delivered a 1.7 per cent rise in US like-for-like sales during the same period.

RBI chief executive David Schwartz acknowledged during a call with investors on Wednesday that the quarter had been challenging, particularly in comparison with the first quarter of 2016, one of its strongest last year.

Especially in the US, fast-food is “a competitive industry always has been, always will be, it doesn’t change our focus and our drive to drive great guest satisfaction get profitability for our franchises,” Mr Schwartz said on the call.

He said RBI remains confident it can grow Burger King’s same-store sales for the rest of the year, including the launch of the “improved” crispy chicken sandwich late in the quarter, which is “performing well”. Other new menu items aimed at luring in customers include a recently launched premium beef sandwich, the Steakhouse King, and a Froot Loops milkshake inspired by the fruity US breakfast cereal.

Also on the chicken front, RBI completed its acquisition this quarter of Popeyes Louisiana Kitchen, a fried-chicken chain, during the quarter. Although comparable stores growth was down 0.2 per cent for that chain in the quarter, Mr Schwartz said the company hoped to accelerate its US growth in the coming year.

Canada-based RBI — created in 2014 by the merger of Tim Hortons and Burger King, which had been taken private by Brazilian private-equity firm 3G Capital Management — saw its shares fall more than 3 per cent on Wednesday after the results were released. Over the past 12 months, its shares have increased more than 34 per cent.

Copyright The Financial Times Limited 2017. All rights reserved.
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