MONTREAL — MTY Food Group Inc. reported results for the fourth quarter and year ended Nov. 30, 2018.
The company achieved positive results, due largely to five acquisitions made throughout 2018, which totalled 702 locations. Acquisitions completed during fiscal 2018 include The Counter Custom Burgers and Built Custom Burgers; Imvescor Restaurant Group Inc.; SweetFrog Premium Frozen Yogurt; Timothy’s World Coffee and Mmmuffins; and Grabbagreen.
At year end, MTY’s portfolio comprised 5,984 locations. Geographical distribution of its locations remaining steady with 47 per cent in the U.S., 44 per cent in Canada and nine per cent abroad.
For the fourth quarter of 2018, system sales were up 30 per cent compared to 2017, reaching $707.4 million. “The growth is primarily attributable to recent acquisitions. Although organic growth was marginally positive for the first time in five quarters,” commented Eric Lefebvre, CEO of MTY. “Canadian same store sales were up slightly, making this the fifth consecutive quarter of positive growth. Most of our territories showed positive results, with the exception of Saskatchewan, which remains under significant pressure, and Quebec, which experience its first decline after a series positive periods.”
These positive results were somewhat tempered by Q4 declines in sales at locations in the U.S. (down 1.9 per cent) and outside of North America (down 8.9 per cent).
Additionally, same-store sales for Imvescor restaurants, which are not included in the company’s consolidated same-store sales, grew by 1.9 per cent in the fourth quarter, led by Ben & Florentine, Mikes and Scores.
Looking at full-year results, system sales for the network were up 21 per cent compared to 2017 — reaching $2,782.5 million — while same-store sales were down slightly. Canadian sales grew by one per cent, while U.S. sales declined by 0.9 per cent (largely due to the California market). Though not included in consolidated same-store sales for the year, Imvescor sales were up 2.1 per cent.
Lefebvre noted that third-party delivery services have contributed to an uptick in sales for many brands, including Mucho Burrito, which has partnered with SkipTheDishes.
“We have introduced delivery for most of our brands. Some brands are closer to having 100 per cent of the network than others,” he explained. “We are seeing a lift in sales. And, as long as the sales are incremental — or at least the vast majority of the sales that we’re generating from these platforms are incremental — the economic model will work.”
“What we’re seeing at the moment is mostly incremental sales and it’s proving to be very positive,” he added, admitting that it’s unclear how long this trend would continue. “The day we start selling to customers that would otherwise come to the store, that’s where we’re going to have to ask ourselves questions, because the fees related to delivery will have an impact on our franchisees margins; then the business model will have to shift one way or another.”
Looking to fiscal 2019, MTY has already acquired most of the assets of Laval, Que.-based Casa Grecque in a deal worth $22.4 million and has signed an agreement to acquire Toronto-based South St. Burger, which is expected to close within 90 days.
“For fiscal 2019, we expect ongoing competition and increased volatility in earnings, driven by unpredictable weather conditions and the variations in the price of commodities and currencies,” Lefebvre stated. “Looking forward, we will continue to focus on our strategy to maximize shareholder value by integrating recent acquisitions, adding new locations of our existing brands and seeking potential acquisitions to increase market share.”