A&W same-store sales up 10%, partly due to innovative products

VANCOUVER — Innovation continued to drive strong sales at A&W Canada, the burger chain's CEO says, as even severe winter weather didn't stop Canadians from coming in to eat its new vegetarian offerings.

"One of the drivers behind our sales growth is our innovation," said Susan Senecal during a conference call with investors Friday afternoon after the A&W Revenue Royalties Income Fund released its first-quarter results.

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Same-store sales, a key retail metric, increased 10 per cent for the quarter ended March 24, the fund said, and sales reported by the restaurants in the group increased to $308.8 million compared with $267.7 million.

The same-store sales figure was "well ahead" of Laurentian Bank Securities five-per-cent forecast, wrote Elizabeth Johnston, an analyst with the bank, in a note. It comes "in an environment where industry traffic overall remains under pressure," she said.

Earlier this week, Restaurant Brands International, the parent company of Tim Hortons, said same-store sales for the coffee chain in Canada fell 0.4 per cent during its most recent quarter, which ended March 31. Executives attributed some of the drag to severe winter weather and an outdated Roll Up The Rim promotion.

Johnston noted that A&W's Beyond Meat vegetarian burger offering, which it launched last July, likely continued to drive sales, adding the chain also started to sell a Beyond Meat breakfast patty close to the end of first quarter.

These innovations contributed to the positive sales, said Senecal, as did other factors, including delivery through Uber Eats where the service is available.

The sales growth came in all provinces and across all different types of A&W restaurants, she said, mostly shrugging off any weather impact over the quarter.

Early in the year, weather caused some volatility, and there were certainly weeks where it was clear that weather patterns affected performance in certain regions, she said.

"It all kind of balanced itself out," she said.

The fund's profit fell to $5.7 million compared with a year ago sum of $6.3 million due to a non-cash loss on an interest rate swap. Royalty income grew to $9.3 million compared with $8 million a year ago.

The fund increased its distributions to unitholders. It will now pay a monthly cash distribution of 15.4 cents per unit, up from 14.7 cents per unit.

The number of restaurants in the royalty pool grew to 934 compared with 896 a year ago.

A&W Revenue Royalties Income Fund's website describes it as a limited purpose trust established to invest in A&W Trade Marks Inc., which indirectly owns the trademarks used in the A&W restaurant business in Canada.

The fund's units closed up $1.75 or 4.22 per cent to $43.21 in Friday trading on the Toronto Stock Exchange.

Follow @AleksSagan on Twitter

Companies in this story: (TSX:AW.UN) (TSX:QSR)

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