Tim Hortons' focus on fewer items such as grilled wraps and pulled pork sandwiches helped the coffee chain's owner shave costs and boost sales, contributing to a strong first quarter.
Tim Hortons, which was acquired late in 2014 by Restaurants Brands International Inc. – also the owner of Burger King – enjoyed a same-store sales jump of 5.6 per cent (on a constant currency basis) at stores open a year or more – a key retail measure.
"We're focused on investing our resources and time in … trying to do fewer but more impactful things in our restaurants," Daniel Schwartz, chief executive officer of parent RBI, said in an interview. "We think we made good progress and you're going to see us continue to move in this direction."
But he warned of potentially weaker same-store (or comparable) sales for the remainder of the year after the company benefited in the first quarter from the Leap Year, which gave it an extra day compared to the prior year, and milder weather compared with a year earlier.
"We're going to be facing some more challenging prior-year comparable sales levels as we progress throughout the year," Mr. Schwartz told analysts.
RBI of Oakville, Ont. has been rushing to cut costs and trim its offerings as it focuses on building its bottom line and expanding internationally amid harsh competition.
RBI posted a first-quarter profit of $50-million (U.S.) or 21 cents a share compared with a loss of $8.3-million or 4 cents a share a year earlier.
Sales slipped to $918.5-million from $933.3-million as the weak Canadian dollar pinched Tim Hortons' revenue.
On an adjusted basis, Restaurant Brands said it made a profit of $142.1-million or 30 cents a share, up from $73.9-million or 16 cents per share a year ago.
Comparable store sales at Tim Hortons increased 5.6 per cent after adjustments for currency changes, while Burger King saw a 4.6 per cent gain.
"Innovative product launches and continued expansion of our global footprint drove favourable comparable sales and system-wide sales growth for the quarter," Mr. Schwartz said.
He said the strategy of concentrating on fewer, more meaningful menu items has paid off in, for example, the recent relaunch of grilled wraps at Tim Hortons for breakfast and lunch after those items had been rolled out last year. He did not provide an example of items that were discontinued. "It's less about discontinuing things and more about investing in building strong sustainable platforms that franchisees can earn good profits from."
Burger King has enjoyed robust sales of such new items as a grilled hot dog, he said.
Josh Kobza, chief financial officer of RBI, said it gained more savings in its supply chain and other areas as it operated more efficiently, especially at Tim Hortons. RBI's parent, 3G Capital of Brazil, is known for slashing expenses after having acquired such companies as Kraft Foods and Heinz.
"A big part of our culture is looking at our whole business with an ownership mindset," he said. 'We look at that in everything, whether it's the costs in our business or the way we look at growing our brands all around the world.
"We have a mindset and culture across our business and across our brands that cause our people to act like owners in our business," he said." That applies to everything we do … We spend every dollar as if it were our own money, which is just good business sense."
Mr. Schwartz said business softened a little at Burger King in the United States in the current quarter but he refrained from commenting on the business in Canada in the second quarter. "We're very confident in the strategy," he said. "We're feeling really good about the outlook for the year and the long run."
And he told analysts: "Some quarters will be stronger than others, that's how our business works."
David Palmer, analyst at RBC Capital Markets, said slowing same-store sales momentum at Burger King during the first part of the current quarter could just be the timing of discounted offers "and we remain confident that trends can reaccelerate during the second half of the quarter."
He said it appears that Burger King "weathered the storm of competitive discounting" in the first quarter with its own promotions, such as a 2 for $5 sandwich deal and 10 chicken nuggets for $1.49.