Sales at Tim Hortons locations dropped 4.3 per cent in the final quarter of 2019, including a 4.6-per-cent drop in Canadian sales, parent company Restaurant Brands International (RBI) reported on Monday.
Analysts had expected a much milder 2.44-per-cent drop in comparable sales at at the coffee chain, RBI’s biggest business by revenue.
Tim Hortons has struggled to attract diners amid intense competition from Starbucks Corp, Dunkin and other third-wave coffee shops.
The chain even launched a plant-based breakfast sandwich with Beyond Meat sausages in Canada last year to attract more diners, but was forced to discontinue the product within months.
“There is clearly a sizable gap between what this brand is capable of and the performance we’ve delivered,″ said CEO Jose Cil during a conference call with analysts Monday after the company released its fourth-quarter and full-year financial results.
Investment in the company’s rewards program geared at attracting members dragged down comparable sales by three per cent in Canada, the company said, while softness in lunch food added another one per cent of negative performance.
Franchisee profitability also fell compared to last year, said Cil, though the company did not provide a figure. He attributed the drop to lower sales, as well as pressure from labour costs in parts of Canada.
Despite the disappointing numbers at the coffee chain, RBI saw its U.S.-listed shares jump 4 per cent Monday morning, on the strength of its Popeye’s chicken chain. It saw a 34.4-per-cent jump in same-store sales, well above analysts’ forecasts of around 12 per cent.
Popeyes brought back its hugely popular chicken sandwich last November, months after its launch in August led to shortages at many of its outlets and triggered a “chicken war” with Chick-fil-A on social media among diners.
The strong demand also prompted rival McDonald’s Corp to test its own chicken sandwich at some of its chains.
RBI said performance at Tim Hortons did not reflect the strength of the brand and that it would work to refocus on its “founding values″ in an effort to reignite growth in Canada.
Back to basics
It plans to fix the coffee-and-doughnut chain’s performance by elevating the quality of its core categories through innovation and investments in modernizing the brand.
It plans to accelerate a roll out of fresh coffee brewers for better-tasting and more consistent coffee quality, said Cil.
The chain also plans to start offering more than one type of milk for customers, including skim milk and a dairy alternative, almond, starting this spring.
“These adjustments may seem basic, but that’s the point: being the absolute best at the basics that we’re already famous for,″ said Cil.
The parent company of Tim Hortons, Burger King and Popeyes, which keeps its books in U.S. dollars, says it will pay a quarterly dividend of US$0.52 per share, up from an earlier payment of US$0.50.
The increased payment to shareholders came as Restaurant Brands reported net income of US$257 million or 54 cents per diluted share for the quarter ended Dec. 31, down from US$301 million or 64 cents per diluted share in the last three months of 2018.
On an adjusted basis, Restaurant Brands says it earned US$351 million or 75 cents per share for the quarter, up from an adjusted profit of US$318 million or 68 cents per share in the same quarter a year earlier.
Revenue totaled nearly US$1.48 billion, up from nearly US$1.39 billion.
― HuffPost Canada with files from Reuters and The Canadian Press