Burger King Channel Checks Looking Good, Restaurant Brands Investors

Longbow’s Alton Stump expressed optimism regarding the long-term fundamentals of Restaurant Brands International Inc (NYSE: QSR).

Stump maintains a Neutral rating on the company.

Burger King

The analyst mentioned that checks with Burger King franchisees in the United States suggest that same-store sales of this concept grew 3.0–3.5 percent domestically during 1Q16, well ahead of the one percent comp growth estimate and consensus of 1.7 percent.

“The single greatest driver behind Burger King’s improved comp performance over the last 24 months in North America was management’s successful initiative to shift away from frequent LTOs and toward less frequent but more impactful and permanent new product introductions,” Stump explained.

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Comp Drivers

The analyst also pointed out that this comp growth indicates acceleration of more than 300 bps.

In addition, the launch of hot dogs in the beginning of 1Q16 drove better than anticipated comp lift of an average of 100–150 bps.

“Share pressure from the All Day Breakfast launch by McDonald's Corporation (NYSE: MCD) lessened for Burger King sequentially as customer excitement and trial usage related to the All Day Breakfast launch waned,” Stump stated.

Also, the Burger King stores that were remodeled during 1Q witnessed significant comp increase of over 20 percent, while the launch of Burger King’s "five for $4" combo offer on January 5 failed to generate any meaningful comp lift.