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Restaurant Brands gets a lift from Burger King turnaround, strong demand at Tim Hortons

Published 02/13/2024, 06:39 AM
Updated 02/13/2024, 12:11 PM
© Reuters. FILE PHOTO: A sign advertising the soy based Impossible Whopper is seen outside a Burger King in New York, U.S., August 8, 2019. REUTERS/Shannon Stapleton/File Photo

By Deborah Mary Sophia

(Reuters) -Restaurant Brands International beat Wall Street estimates for quarterly results on Tuesday, fueled by early success of an ongoing turnaround at its Burger King business and robust demand at coffee chain Tim Hortons.

The company's shares, however, slipped 3% on caution around its business in China and sluggish international sales due to the Israel-Hamas war, as well as weakness in some Western European markets.

There was "a little bit of softening in fourth-quarter same-store sales," in China, CEO Josh Kobza told Reuters in an interview. That prompted the company to lower its expectations for global net restaurant growth in 2024.

"There are a number of opportunities to generate that growth ... But we're being practical about the pace of growth we're forecasting in China," Executive Chairman Patrick Doyle said on an earnings call.

Still, steady demand for cold drinks and breakfast bundles at Tim Hortons and the first traffic growth at Burger King since the second quarter of 2021 amid a $400-million turnaround plan propped up the U.S. business.

Launched in September 2022, the revamp includes remodeling stores and tailoring marketing to draw more younger customers to take on larger rival McDonald's (NYSE:MCD).

Burger King's cheaper menu items such as the Royal Crispy Wraps and deals like the '$5 Duo' meal have also helped attract new customers and drive store traffic growth across all income groups.

"(Burger King showed) nice improvement across the board ... Perhaps this is the beginning of an era where Burger King can step it up and narrow the gap (with McDonald's)," said Stephens analyst Joshua Long.

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Total revenue at Restaurant Brands (NYSE:QSR) rose 7.8% to $1.82 billion in the quarter, edging past LSEG estimates of $1.81 billion. Adjusted per-share profit of 75 cents exceeded expectations of 73 cents.

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