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The company behind Burger King and the Canadian coffee chain Tim Hortons has become the latest to report slowing sales growth in the last three months of last year, as intense competition and a cut back in consumer spending on eating out continue to take its toll on the entire restaurant industry.
Restaurant Brands International said like-for-like sales – a key industry metric – at Burger King grew 2.8 per cent during the fourth quarter. While that’s ahead of the 2.5 per cent growth the market was expecting, it is a sharp slowdown from the 3.9 per cent gain reported in the prior year period. The decline also comes despite the roll out of new items such as hot dogs last year.
Trading conditions were equally tough over at Tim Hortons, the Canadian coffee and doughnuts chain RBI bought in 2014. Comparable sales growth slowed to 0.2 per cent during the quarter, down from 6.3 per cent in the previous year’s period.
The two chains’ performance underscores the challenges that fast casual restaurant operators are facing at the moment. Alongside consumers’ preference for healthier offerings, restaurant groups are also being pressured by the rising cost of eating out and falling prices at the grocery store.
A fall in grocery prices is making it more attractive for consumers to cook at home rather than dine out. McDonald’s and Pizza Hut have both reported a drop in fourth quarter sales while Taco Bell and KFC saw their sales growth slow.
However, restaurant groups – despite falling commodity prices – have not been able to cut prices because minimum wages increases and a healthier jobs market means companies are having to pay their employees more.
Overall total revenue at RBI grew 5 per cent during the quarter to $1.1bn, in line with expectations, thanks to new restaurant openings.
Net income more than doubled to $118.4m, or 50 cents a share. Adjusted earnings, at 44 cents a share, was ahead of estimates for 42 cents.
“Our continued focus on guest satisfaction and value creation for all of our stakeholders has resulted in accelerated restaurant development and continued system-wide sales growth at both of our iconic brands,” said Daniel Schwartz, chief executive, in a release. “We are excited about our progress this year and are committed to building on these results to achieve long-term sustainable growth.”
Shares in RBI rose 1.9 per cent to $52.39 in early trading, taking the stock’s gain over the past 12 months to more than 63 per cent.