Burger King's Owner Tumbles as Chain Loses Ground to McDonald's

  • Same-store sales fell 0.1%, versus 1.5% gain seen by analysts
  • Decline follows surprising strong results from McDonald’s

McDonald's Posts Surprisingly Strong Sales Growth

Burger King is losing ground to McDonald’s Corp. in the hard-fought battle for U.S. fast-food customers.

Shares of Burger King’s owner, Restaurant Brands International Inc., tumbled the most since August 2015 after the chain’s same-store sales fell 0.1 percent in the first three months of the year. That trailed the 1.5 percent gain estimated by analysts, according to Consensus Metrix.

The burger chain is facing more U.S. fast-food competition, especially for cheap deals. McDonald’s Corp. has been advertising $1 and $2 drink specials, while Wendy’s Co. has had success with its four-for-$4 meal. Grocery deflation also is roiling the industry because it’s increasingly cheap for consumers to eat at home. In the U.S., Burger King same-store sales fell 2.2 percent, according to a statement Wednesday. Analysts estimated a 0.3 percent drop for the U.S. and Canada combined.

In contrast, McDonald’s reported yesterday a 4 percent gain in same-store sales last quarter, topping analysts’ projections. Its drink promotions and a revamped Big Mac sandwich helped fuel growth.

Burger King, meanwhile, offered a new crispy chicken sandwich last month and has added a shake made with Froot Loops to its menu in a bid to drive restaurant traffic.

“The business will always be competitive,” Restaurant Brands Chief Executive Officer Daniel Schwartz said in an interview. “But regardless of what going on at the macro level, its our job to drive sales growth and profitability growth for our restaurants.”

Restaurant Brands shares fell as much as 7.6 percent to $54 in New York trading, the biggest intraday decline in 20 months. The Oakville, Ontario-based company had gained 23 percent this year through Tuesday’s close.

New Restaurants

Same-store sales also dropped at Restaurant Brands’ Tim Hortons coffee and doughnut chain. They fell 0.1 percent, while analysts projected an 0.8 percent gain.

The company added 30 Burger King locations and 31 Tim Hortons in the quarter, which may have helped it surpass analysts’ projections for profit and revenue. Earnings climbed to 36 cents a share, excluding certain items, topping estimates by 2 cents. Sales rose to $1 billion, compared with the average prediction of $989.4 million.

Popeyes Louisiana Kitchen, which Restaurant Brands bought earlier this year for $1.8 billion, is seen as a potential growth engine for the company. But it, too, posted a drop in same-store sales during the period, with the measure falling 0.2 percent. The plan is for the 2,600-location Popeyes to be independently managed in the U.S.

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