Restaurant Brands International Inc. has announced its plans for reopening dining rooms across its portfolio of fast-food chains, including Popeyes Louisiana Kitchen, which barely lost momentum despite the spread of C-19 coronavirus and is set up for a stronger recovery, according to analysts.
In an open letter from Restaurant Brands CEO Jose Cil, the company said acrylic shields and contactless service has been put in place at its restaurants, tabletop signage designates which tables have been set aside for social distancing purposes, and self-serve soda fountains have been turned off.
KeyBanc Capital Markets analysts expect demand for Popeyes chicken meals to be strong, analysts wrote: “The ‘V-shaped’ recovery at Popeyes was unexpected, and we continue to be amazed by the strong performance and sustainability of recent trends,” wrote analysts. “We believe the chain’s impressive performance during this crisis will only increase demand for that brand by consumers and in the franchising community and support accelerating unit growth in the years ahead.”
Restaurant Brands, whose portfolio also includes Burger King and Tim Horton’s, reported Q-1 earnings on 1 May: Net income totaled $144.0-M, or 0.48/share, up from $135-M, or 0.53/share, last year. Revenue was $1.225-B, down from $1.266-B in Y 2019.
System-wide sales at Popeyes were up 32.3% for the Quarter, while dropping at Burger King and Tim Hortons, 3% and 9.9% respectively.
And same-restaurant sales were up 26.2% at Popeyes, down 3.7% at Burger King and 10.3% at Tim Hortons.
Same-restaurant sales were up in the mid-30% range in January, February and the first couple of weeks in March, CEO said. Same-restaurant sales declined to flat for the last 2 wks of the month.
“Popeyes’ success last year was unlike anything any of us have seen in our careers, but its resilience in the face of COVID-19 with dining rooms closed across the country has been equally remarkable,” CEO Cil said on the earnings call, according to a FactSet transcript.
“We’ve made many important adjustments at Popeyes since the global spread of COVID-19, rolling out contactless procedures in the drive-thru and putting additional resources behind delivery and mobile order and pickup.”
KeyBanc analysts say they are Bullish about Popeyes for the long term, though the chain does not get as much attention as it should because it is so much smaller than the others in the Restaurant Brands portfolio.
At the end of Q-1, there were 3,336 Popeyes restaurants, 18,848 Burger King locations, and 4,925 Tim Hortons.
KeyBanc rates Restaurant Brands overweight with a 54 price target.
“Popeyes all but immune to COVID,” wrote Stifel analysts
. Chicken sandwiches remain the Star at Popeyes, but other items on the menu, including bone-in chicken and seafood also grew.
“Quarter-to-date, Burger King saw a rate of recovery similar to quick-service restaurant-burger peers, while Popeyes defied the gravity of a national lockdown and returned to pre-COVID comp growth in April,” Stifel said. “We believe the resilience of Popeyes sales will only serve to accelerate its domestic development prospects.”
Stifel rates Restaurant Brands stock hold with a 53 price target.
Restaurant Brands stock has tumbled nearly 24% over the past year, while the S&P 500 index is about breakeven for the frame.
Our technical outlook for QSR is Bullish to Very Bullish looking for a return to the mid February highs at 66/share of higher on a clear break above 55.63. There is strong Support at 50.04 and Key resistance at 61.29.
Have a healthy weekend, Keep the Faith!