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Bad weather and “sluggish” consumer spending dealt MTY Food Group Inc. a double whammy in the first quarter, sending the fast-food chain owner’s profits down from a year earlier.
The Montreal-based restaurant owner, whose line of brands includes Thai Express, Manchu Wok, Mucho Burrito and Cold Stone Creamery, reported profit of $17.3 million, or 71 cents per diluted share, for the quarter ended Feb. 29.
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The result was below profit of $18.4 million, or 75 cents per diluted share, a year earlier.
“First quarter results were negatively impacted by extreme weather conditions, particularly in January and the first two weeks of February,” MTY Chief Executive Eric Lefebvre told analysts in a call Friday.
“Extremely cold temperatures across most of North America placed significant pressure on our system sales, particularly in the frozen treats portion of our quick-service restaurants, while ill-timed snowstorms impacted sales in the northeast portion of our portfolio.”
He noted that the inclement weather caused people in many of MTY’s key markets to “more or less shelter in place” and were uninterested in seeking out some of the company’s more sun-friendly offerings.
“Ice cream and smoothies aren’t particularly popular when it’s very cold or there’s a snowstorm,” he said.
The bad weather was compounded by a “challenging economic environment,” with interest rates and inflation remaining high, dampening consumer spending.
Due to these trends, MTY’s quarterly revenue was $278.6 million, down from $286.0 million in the year-ago quarter, while same-store sales declined three percent year-over-year.
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The first quarter of the year has long been considered a “challenging time,” particularly for store openings and closings, Lefebvre said.
In the first quarter, MTY opened 75 locations, one fewer than in the same quarter last year, and closed 79 more, compared to 115 a year ago.
At the end of the quarter, MTY had 7,112 locations – mostly franchised or part of operator agreements – with 90 banners.
About 58 percent were in the United States, 35 percent in Canada and seven percent in other international markets.
In MTY’s home market of Canada, competition has intensified across the fast food sector. US brands Shake Shack, Jimmy John’s and Jersey Mike’s are planning major expansions across the country.
Tim Hortons and Harvey’s, both of which are celebrating milestone anniversaries this year, have also invested heavily in marketing, new products and promotions to mark the occasion.
However, Lefebvre does not expect competitors to be “extremely aggressive” with prices or discounts.
“But it could come, so we have to be prepared,” he warned.
Asked by an analyst if any brands were on his radar for acquisition, he said: “I wouldn’t expect anything significant this year.”
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“Of course, something could always happen that we can’t miss and we really want to try, but at the moment we’re not thinking about anything significant,” he said.
“Maybe there will be smaller deals here and there, but nothing that would significantly increase our debt levels.”
At the end of February, MTY had cash on hand of $50.6 million and long-term debt of $736.2 million, primarily in the form of bank facilities and acquisition notes.
The company repaid $34.6 million of its long-term debt, paid $6.8 million in dividends to shareholders, and purchased and canceled 70,800 shares in the first quarter for a total price of $3.6 million.
MTY’s share price fell $4.66, or more than nine percent, to $45.48 in mid-morning trading.
This report by The Canadian Press was first published April 12, 2024.
Companies in this story: (TSX:MTY)
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