Burger King's Owner Tops Estimates as New Foods Fuel Sales

  • Expanded selection of chicken fries boost chain's revenue
  • Tim Hortons unit's comparable sales gain, helped by drinks

Restaurant Brands International Inc., the owner of Burger King and Tim Hortons, reported fourth-quarter profit that topped analysts’ projections after new menu items helped sales at the burger chain.

Profit was 35 cents a share, excluding some items, the Oakville, Ontario-based company said Tuesday in a statement. Analysts estimated 29 cents, on average.

The results show Burger King’s efforts to draw diners with new foods -- including new milkshakes and different varieties of chicken fries -- are paying off. The chain introduced a buffalo flavor in October and has since started selling a jalapeno variety. Fast-food chains are competing to boost sales as restaurant labor costs rise and Americans look for unique flavors and better deals.

"Food innovation is a priority, it always will be," Chief Executive Officer Daniel Schwartz said in an interview. The company also is focused on opening new units and remodeling older ones, he said.

Burger King’s same-store sales climbed 3.9 percent in the quarter. Analysts estimated a 3.8 percent gain, according to Consensus Metrix.

Restaurant Brands rose 5.7 percent to $33.82 in New York after the results were posted. The shares have slid 9.5 percent this year amid a broader market decline.

The company posted net income attributable to common shareholders of $51.7 million, or 25 cents a a share, compared with a loss of $510.8 million, or $2.50, a year earlier. Total company revenue was $1.06 billion, topping analysts’ $1.03 billion average estimate.

Biggest Change

Last week, Burger King made its biggest menu change in decades, saying it will start selling beef hot dogs later this month. The hot dogs are coming from Oscar Mayer, which, like Burger King, is managed by 3G Capital, the private equity firm founded by Brazilian billionaire Jorge Paulo Lemann.

Burger King also got into the U.S. fast-food value wars by introducing a five-items-for-$4 deal in January. The meal includes a bacon cheeseburger, fries, drink, four-piece chicken nuggets and cookie. McDonald’s Corp., which has had success lately selling breakfast all day, recently advertised a two-for-$2 deal, while Wendy’s Co. is offering four items for $4.

Tim Hortons same-store sales jumped 6.3 percent, while analysts had predicted a 3.9 percent increase. Drinks and new products, such as Nutella pockets and grilled wraps, helped fuel sales, the company said.

The Canadian doughnut seller is accelerating its expansion in its home market, as well as with new shops in the U.S. and abroad -- Tim Hortons opened 155 net new stores last year. The brand recently signed new development agreements to expand in cities including Indianapolis, Cincinnati, and Columbus, Ohio.

"We’ve done a good job laying the foundation for growth of Tim Hortons in the U.S.," Schwartz said. "The potential for the brand there is huge."

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