Restaurant Brands (QSR, Financial) reported another strong quarter of underlying earnings in the second quarter of 2016. The company continued to deliver strong net unit growth at both concepts while substantially improving Tim Hortons' cost structure. Same-store-sales growth decelerated from prior quarters against a backdrop of slowing growth for the U.S. fast-food industry.
Same-store-sales for the quarter grew nearly 1% at Burger King and 3% at Tim Hortons. Same-store-sales for Burger King's U.S. business declined 1% in the second quarter, due in part to the industry slowdown and a tough comparison against nearly 8% growth in last year's second quarter. Over time, we expect Burger King's U.S. same-store sales to increase at a healthy rate as the company narrows the sales gap with its key U.S. competitors. Net units grew 4% and the development pipeline remains strong. As a result of same-store-sales and net unit growth, Restaurant Brands' organic revenue grew 4%.
The company continued to reduce Tim Hortons' overhead costs and improve margins in its franchised operations and distribution businesses. As a result of strong top-line trends and cost reduction initiatives, Restaurant Brands grew organic EBITDA 16% this quarter. Although the strengthening USD remained a headwind, Restaurant Brands' reported EBITDA grew 12%.
From Bill Ackman (Trades, Portfolio)'s mid-year 2016 letter.
