Restaurant Brands International Inc. (NYSE:QSR) stands poised to capitalize on robust growth in comparable sales, digital advancements, and the impressive performance of Popeyes. Additionally, its strategic focus on expansion efforts positions it favorably. However, concerns arise due to heightened inflationary pressures.
Reasons to Maintain Investment in QSR Stock
Several compelling factors underline the rationale for investors to retain their holdings in Restaurant Brands.
Driving Growth
Restaurant Brands continues to garner investor attention with its strong compounding growth. During the second quarter of 2023, the company achieved consolidated comparable sales growth of 8.6%, surpassing the 8.2% reported in the same quarter of the previous year. Tim Hortons (TH), Burger King (BK), and Popeyes (PLK) witnessed comparable sales growth of 11.4%, 10.2%, and 6.3%, respectively, in contrast to 12.2%, 8.7%, and (1.4%) recorded in the prior-year quarter.
This upswing is primarily attributed to increased footfall, enhanced core offerings, optimized restaurant operations, and pricing strategies. Digital Advancements In response to the pandemic, the company has proactively expanded its delivery services through digital platforms.
In the second quarter of 2023, digital sales surged by 22% year-over-year, driven by substantial contributions from kiosks and delivery services. Demonstrating a strong commitment to digitalization, Restaurant Brands continued to fuel growth for its Tim Hortons brand, boasting 4.9 million average monthly users and a consistent digital sales mix of around 33% throughout the quarter. Buoyed by diverse service approaches, the company holds a positive outlook for digital sales growth in global markets.
Popeyes Performance
The second quarter of 2023 witnessed impressive top-line performance from the Popeyes brand. This success can be attributed to various factors, including the expansion of the chicken sandwich platform, the introduction of Ghost Pepper Wings, innovations in beverages and desserts, and a substantial 22% surge in digital sales. In the United States, Popeyes reported a noteworthy 4.2% increase in comparable sales, a 5.1% rise in net restaurant count, and a robust 9.4% growth in system-wide sales.
Expansion Initiatives
Restaurant Brands is poised to unlock significant growth opportunities for all its brands on a global scale by expanding its presence in existing markets and venturing into new ones. During the second quarter of 2023, the company successfully opened 169 net new restaurants, contributing to a 4.1% year-on-year growth in the overall restaurant count. With the launch of its first international Firehouse location in Zurich, Switzerland, Restaurant Brands has set the stage for global expansion. The company remains optimistic about growth prospects in 2023, steadfastly pursuing its long-term goal of reaching 40,000 locations.
Positive Performance and Future Outlook
Over the past year, QSR shares have demonstrated an impressive 14.7% growth, outpacing the industry’s rise of 8.4%. Challenges Ahead Nevertheless, the company grapples with escalating expenses that have taken a toll on its margins. In the second quarter of 2023, total costs of sales amounted to $612 million, reflecting a 4.8% increase from the $584 million reported in the corresponding quarter of the previous year. The upswing can be attributed to higher commodity, labor, and energy costs. Industry players anticipate continued cost challenges due to labor shortages and disruptions in the supply chain. In our 2023 projections, the total cost of sales is forecasted to surge by 9.3% year-on-year, reaching $2.5 billion. Given the prevailing macroeconomic conditions, the company maintains a cautious stance.
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