The number of closures is three times higher than openings at MTY Group, at a time when its franchisees are dealing with a difficult operating environment in the restaurant industry.
Despite the relaxation of sanitary measures, the Montreal company closed 178 establishments in its network of 6,788 restaurants in the fourth quarter, a period which includes the months of September, October and November. This is a modest improvement from the 189 establishments closed during the same period last year.
Closings are thus almost three times more numerous than the new establishments, 60 in number, which opened their doors in the fourth quarter. “This figure must go down, recognized the president and CEO of MTY, Éric Lefebvre, during a conference call with analysts. It’s not a number we’re proud of, and we didn’t expect it to be so high. »
In Canada, the number of closures stood at 69 for the fourth quarter, a number higher than the 68 closures last year.
The leader assured that the teams of the company which owns 80 brands, in particular Valentine, Thaϊ Express and Sushi Shop, “understand what they had to do”. “It is a priority to pay attention to our restaurants in operation. It’s much easier to keep a restaurant than to open a new one. »
The company did not specify the reasons for the closures. Despite a recovery in demand associated with the easing of sanitary measures, several pitfalls complicate the work of restaurant managers, in particular the scarcity of labour, food inflation and rising wages. “We speak more regularly to our franchisees to inform us of their situation,” assures Mr. Lefebvre. If we can help them sell their assets (the restaurant) rather than closing, that’s a better thing for both the franchisee and the franchisor. »
He mentioned that the restaurant industry would have to deal with “a significant increase” in the minimum wage in certain places, notably in Quebec. “We no longer pay minimum wage in our restaurants, but that [une augmentation du salaire minimum] has an effect on our salary structure. In these cases, we will have to adjust our prices slightly. »
Fourth quarter results
In the fourth quarter, MTY announced a net profit of 7.1 million, compared to 24.9 million in the same period last year. However, the company said the decrease was due to acquisition-related transactions and non-cash transactions to account for the impairment of property, plant and equipment.
Mr. Lefebvre did not want to name the signs that were subject to depreciation. He explained that the accounting adjustment was explained by an increase in the cost of capital linked to the rise in interest rates and that the fundamentals were not in question. “We think these signs are doing well and not shaken, but we have to comply with the disclosure rules, obviously, and there are parameters that we have to follow. »
Revenues, for their part, rose by 65% to 242 million.
MTY reported diluted earnings per share below analysts’ forecasts, but at least three analysts believe the company beat expectations for revenue and earnings before interest, taxes, depreciation and amortization.
Despite good results, analyst Derek J. Lessard of TD Securities remains cautious, although MTY’s stock has risen 30% since the start of the year and hit an all-time high. “Our concerns revolve around inflation, which includes the increase in the minimum wage, the impact of rising interest rates on consumer spending and the high number of closures. »