Restaurant Brands: Inflation bites into second-quarter sales for fast food company

Restaurant Brands is bracing itself for a “disappointing” full-year net profit.

Restaurant Brands is bracing itself for a “disappointing” full-year net profit thanks to inflation taking a bite out of the fast food company’s second-quarter sales.

Net profit after tax (NPAT) guidance for the 2023 financial year is now expected to be in the range of $12 million to $16m. In 2022, Restaurant Brands’ net profit for the 12 months ended December 31 fell 38 per cent from the previous year, from $51.9m in 2021 to $32.1m in 2022.

Last year’s net profit plummet was attributed to the “adverse impact of inflation”.

The $51.9m profit in 2021 included forgiveness of an $11.4m US Government loan. The fast-food company told the New Zealand stock market (NZX) on Monday that Restaurant Brands (RBD) was continuing to face global inflationary pressures across the board. This was particularly noticed when it came to rising ingredient and wage costs, which were having a “significant and ongoing impact on profits”.

Even though the company had expected a soft first half for the 2023 financial year, Restaurant Brands said the inflationary environment had “continued to evolve”.

The company’s performance was still being impacted significantly by continuing input cost increases in the New Zealand business, which had “exceeded” earlier scope expectations and the lower-than-expected sales growth in California and Hawaii.

In its Monday announcement, Restaurant Brands New Zealand chair José Parés said the board acknowledged the 2023 net profit adjustment would be “disappointing” news for shareholders.

But he added that the board had “full confidence” in Restaurant Brands’ new leadership delivering the company’s long-term strategy.

Second-quarter sales

The fast food company said total sales for the second quarter to June increased to $331.6m, up 7.1 per cent or $22.1m from the previous corresponding period.

This reflected the price increases across all its markets and the ongoing recovery from the Omicron outbreak. Second-quarter sales for its New Zealand region were up 7.2 per cent to $142.9m, largely driven by pandemic-related trading constraints loosening and price increases in stores.

Meanwhile, Australia’s sales for the second quarter came to A$72.4m ($78.2m), which was an increase of 13 per cent from the prior year. Mall and city store sales had recovered to “near pre-Covid-19 levels”, the company told the market. Second-quarter sales for Hawaii and California were mixed.

Hawaii saw sales of US$40.4m ($65.3m) - flat on a total basis - while California sales edged down 1.5% per cent to US$27.9m. Restaurant Brands will announce its half-year trading results to the market on August 28.

During the quarter, New Zealand didn’t close or open any stores, but Australia increased by two, Hawaii decreased by two and California rose by one.

The company’s share price fell 5.5 per cent to $6.03 after the market opened on Monday. Restaurant Brands’ share price has fallen 47.8 per cent in the past three years.