Canadian Manufacturing

COVID-19 takes big bite out of A&W results as same store sales plunge

At its peak, 230 of 971 restaurants in its royalty pool were closed

July 22, 2020  The Canadian Press

VANCOUVER — A&W Revenue Royalties Income Fund saw same-store sales plunge more than 30% in its most recent quarter as the fast-food chain kept many of its locations shut down due to the COVID-19 pandemic.

“The actions required in response to the COVID-19 pandemic have negatively affected A&W restaurant operations in Canada, including temporary closure of a large number of restaurants,” said Susan Senecal, president and CEO of A&W Food Services, in a conference call with analysts July 22.

Same-store sales, a key retail metric, fell 31.6% for the second quarter ended June 14 from the same period the previous year.

At its peak, 230 of 971 restaurants in its royalty pool were closed. At the end of the quarter 109 remained shuttered, and the chain was restricted to drive-thru operations, delivery and mobile ordering only for most of the three-month period.

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By July 22, only 21 locations remained closed and the company expects these to reopen as local authorities allow.

Sales improved with re-openings over the three months ended June 14, with same-store sales down 20% in the last four weeks of the quarter compared with a 45% decrease in the first four weeks.

Gross sales at A&W restaurants in the royalty pool decreased 28% to $253.2 million compared with $351.8 million in same quarter last year.

Net income fell to $4.24 million from $7.55 million in the second quarter of 2019.

Monthly distributions to unit-holders that were suspended to preserve cash during the pandemic are being reinstated and paid at 10 cents per unit as of July 31.

“We believe that the food service industry and more particularly, the quick-service restaurant segment of the industry, will recover from the impact of COVID-19,” said Senecal.

“However, the timing and the strength of the recovery cannot yet be predicted with any degree of certainty,” she said, noting the duration of government relief programs remains uncertain.

The company believes several factors, including strategic initiatives that differentiate the brand through the ingredients it uses and continued new restaurant growth, will help it recover.