Consumers may be cutting back. But they’re apparently still treating themselves to a soft pretzel or some ice cream.
That, at least, is based on the latest earnings report from the Canadian restaurant chain operator MTY Food Group. On balance, the economy is holding back same-store sales at the company’s chains. The sales are worse in Canada than in the U.S.
But the brand’s snacking division, including new acquisition Wetzel’s Pretzels and the ice cream concept Cold Stone Creamery, have apparently done better.
“We have terrific brands with terrific products, and that’s always the key success factor,” MTY CEO Eric Lefebvre told analysts on Thursday, according to a transcript on the financial services site AlphaSense. “If you have something that’s craveable and if you have something that consumers would really want and that’s experiential, then that helps. And then we have really good teams with really good franchisees. The marketing is outstanding.”
Snacking has been increasingly popular among consumers, and it becomes more popular during periods when consumers are cutting back on dining, as they are now. A low-priced snack is often considered a budget treat.
Overall, same-store sales at the chain’s brands declined 2.1% in the quarter ended May 31. But U.S. same-store sales declined 1%, while its Canadian concepts’ same-store sales declined 3.6%.
MTY suggested that its snack concepts, also including yogurt chains SweetFrog and Pinkberry along with Planet Smoothie, all recorded “strong gains.” The company has more snack chains in the U.S. than it does in Canada, which is a big reason for the difference in performance between the two countries.
“Our snack category in the U.S. performed extremely well, and that’s a category we don’t have much in Canada,” Lefebvre said.
Still, the company blamed its weak overall sales on “reduced spending due to the current economic situation,” including inflation.
MTY is traditionally the earliest company to report earnings and its results can provide some insight into the state of the industry before larger U.S. chains like McDonald’s and Chipotle start reporting their own earnings. More than half, 55%, of MTY’s revenue comes from its U.S. brands.
Company executives noted that the value push in the U.S. has intensified, particularly in the pizza and burger spaces. The CEO added that MTY’s concepts have generally avoided that value war.
“We can’t necessarily play that game with the big guys,” Lefebvre said. “We’re focused on the experiential nature of what we’re doing with our brands. We do have to have some value offers with each of our brands. We need to have a price point that will attract some of the consumers into our stores.”
But, he said, “we don’t want to set a new standard, where the price point would be too low or the expectation would be too low.”
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