Restaurant Brands International(US:QSR)2024-08-08 15:33Financial Data and Key Metrics - Global comparable sales grew by 1.9%, with net restaurant growth of 4%, leading to system-wide sales growth of 5% and organic adjusted operating income growth of 9.3% [6] - Adjusted EPS was $0.86 for the quarter, representing a 3.1% organic increase year-over-year, excluding FX headwinds and benefits from Restaurant Holdings [33] - Free cash flow generated during the quarter was over $290 million, with $261 million returned to shareholders through dividends [36] Business Line Performance - Tim Hortons: Delivered 43% of adjusted operating income, with comparable sales in Canada increasing by 4.9%, driven by strong traffic and check growth [13] - Burger King US: Comparable sales were relatively flat, with a 0.8% decline in system-wide sales, but outperformed the broader QSR industry [20] - Popeyes US: Grew net restaurants by 3.8% and comparable sales by 0.6%, resulting in system-wide sales growth of 4% [23] - Firehouse Subs: Saw relatively flat comparable sales but increased system-wide sales by 3.3%, with over 40% of sales coming through digital channels [27] Market Performance - International Markets: Comparable sales grew by 2.6%, with net restaurant growth of 8.2% and system-wide sales growth of 9.2% [17] - China: The company acquired Popeyes China and made a co-investment in Tim Hortons China, aiming to grow the business before finding a new partner [10] - France: Burger King outperformed the industry, with over 530 locations and $2 billion in annual system-wide sales [17] Strategic Direction and Industry Competition - The company closed the acquisition of Carrols Restaurant Group, planning to remodel 600 Carrols restaurants through 2028 and refranchise the majority of the portfolio [9] - Popeyes is expanding internationally, with significant growth in markets like Spain, the UK, India, and France, and recently entered New Zealand and Costa Rica [18][19] - Burger King US is focusing on value propositions, menu innovation, and operational improvements, with plans to modernize 85-90% of its system by 2028 [22] Management Commentary on Operating Environment and Future Outlook - The company expects system-wide sales growth to be lighter in 2024 compared to the long-term growth algorithm, but remains confident in delivering 8%+ organic adjusted operating income growth [11][38] - Management highlighted the importance of franchisee alignment and cost discipline in navigating the current consumer environment [5][42] - The company is focused on improving operations, digital capabilities, and convenience across all brands to drive long-term growth [44] Other Important Information - The company introduced a new reportable segment, Restaurant Holdings, which includes results from the Carrols acquisition and Popeyes China operations [4] - Tim Hortons Canada achieved a 10% threshold in PM food market share, driven by menu innovation like flatbread pizzas and cold beverages [14][16] - Burger King US is on track to complete nearly 400 remodels in 2024, with remodels driving mid-teens uplift in sales [22] Q&A Session Summary Question: Impact of Restaurant Holdings on operating profit growth [46] - The 8%+ organic adjusted operating income growth guidance excludes Restaurant Holdings, focusing on pre-Carrols transaction results [47] Question: Unit growth expectations for 2024 and beyond [46] - The company expects 4% unit growth in 2024, with plans to accelerate growth in 2025 through improvements in Burger King US, Firehouse, and international markets [48][49] Question: Same-store sales outlook for the second half of 2024 [52] - The company expects second-half comps to be consistent with Q2, around 2%, with stable performance across brands and regions [53] Question: G&A and cost containment in 2024 [58] - G&A reductions are driven by personnel changes, lower incentive-based compensation, and cost discipline measures, with two-thirds of the reductions representing a new baseline [59][61] Question: Burger King US reimage program progress [69] - The company is on track to complete 400 remodels in 2024, with mid-teens sales uplift from reimaged stores, and is transitioning to the new Sizzle image [70][71] Question: Value strategy at Burger King US [76] - Burger King US is maintaining its value offerings, including the $5 Your Way Meal, which is profitable for franchisees and resonates with lower- and middle-income consumers [77][79] Question: Franchisee profitability and cost trends [95] - Burger King US franchisee profitability is stable to improving, with low single-digit commodity and labor inflation expected in the second half of 2024 [96][97] Question: Tim Hortons Canada performance and value positioning [99] - Tim Hortons Canada continues to outperform the industry, with strong value offerings and relentless operational improvements driving growth [100][101] Question: Value messaging in international markets [102] - The company emphasizes great value propositions in international markets, tailoring offerings to local preferences while aligning with core brand strategies [103]