February 10, 2020 / 11:50 AM / 7 days ago

Popeyes sandwiches fuel Restaurant Brands beat, Tim Hortons disappoints

(Reuters) - Restaurant Brands International Inc (QSR.TO) (QSR.N) beat estimates for quarterly results on Monday, as the popularity of fried chicken sandwiches at Popeyes more than made up for an underwhelming performance at Burger King and Tim Hortons.

Same-store sales at Popeyes surged 34.4%, zooming past expectations of a 12.3% rise and recording the best growth since the Southern-style fast-food chain was bought in 2017.

The chicken sandwich was relaunched in November following a successful introduction in August that had led to shortages at many of Popeyes restaurants across the country, while triggering a social media frenzy among diners.

“(Popeyes’ results) demonstrate how much the new chicken sandwich has been a ‘game changer’,” said Jake Bartlett, an analyst with SunTrust Robinson Humphrey.

Popeyes and rival Chick-fil-A’s success also prompted McDonald’s Corp (MCD.N) to test its own chicken sandwich at some of its chains.

Restaurant Brands Chief Executive Officer Jose Cil said on a post-earnings call that diners also spent on other products at Popeyes, resulting in better margins.

The company’s Canadian shares rose nearly 2%.

For an interactive graphic, click here: tmsnrt.rs/2JqOg7q

However, Tim Hortons remained a weak spot.

The coffee chain has introduced new beverages, remodeled stores, opened drive-thrus and launched a loyalty program but has struggled to attract diners amid intense competition from Starbucks Corp (SBUX.O) and other third-wave coffee shops.

“Our approach to product innovation and promotions over the last couple of years has led us to disappointing results,” Cil said, adding that changes to its loyalty program also weighed.

The chain even launched a plant-based breakfast sandwich with Beyond Meat (BYND.O) sausages in Canada last year, but discontinued the product within months.

Tim Hortons, Restaurant Brands’ biggest business by revenue, will launch non-dairy options like almond milk in Spring as it chases higher growth.

Comparable sales at Tim Hortons declined 4.3%, compared with expectation of a 2.44% drop.

A Tim Hortons logo is pictured in Montreal, Quebec, Canada, October 18, 2019. REUTERS/Carlo Allegri

At Burger King, which sells a plant-based burger made by Beyond Meat rival Impossible Foods, same-store sales growth of 2.8% also came in below expectations of 3.4%.

On an adjusted basis, the company earned 75 cents per share, beating estimates by 2 cents.

Restaurant Brands, formed by the merger of Burger King and Tim Hortons in 2014 and backed by Brazilian private-equity group 3G Capital, said total revenue rose 6.8% to $1.48 billion. Analysts had expected revenue of $1.46 billion.

Reporting by Nivedita Balu in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila

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