The CEO of MTY Food Group Inc. says his company is on the hunt for another restaurant chain to add to its vast collection.
Eric Lefebvre said Friday that the Montreal-based business behind dozens of brands including Manchu Wok, Thaï Express, Mr. Sub and Timothy's is "aggressively pursuing acquisitions" but wants to be prudent about any deal it signs.
"We're patient and we're disciplined and we won't acquire businesses at the wrong price or for the wrong reasons," he told analysts on a conference call.
Lefebvre said MTY has been looking to expand its portfolio for a while. He's seen a few transactions elsewhere in the sector lately but said a lot of them were so expensive he considers them "in the stratosphere."
"We're not prepared to do that," he said. "We're going to wait for the market to adjust and we're going to wait for the right targets to be available for us to pull the trigger."
Lefebvre's interest in expansion comes as MTY and other restaurant businesses are fending off a series of headwinds.
Consumer budgets have been strained in recent years and though some are picking up the spending again, a simmering tariff feud is putting others off.
That feud has come largely from the U.S., where President Donald Trump has spent his first weeks in office pushing to support American businesses with tariffs on goods from elsewhere.
He's due to apply 25 per cent duties on all Canadian goods next month, along with additional 10 per cent fees on energy from the country and 25 per cent tariffs on steel and aluminum originating from anywhere outside the U.S. Outgoing Prime Minister Justin Trudeau has promised to retaliate, as have the country's premiers.
Lefebvre has been watching the "fluid situation" because MTY has to source some produce for its Canadian restaurants from California and other places.
"If there's a tariff on fruits and vegetables coming from the U.S. to Canada, that would be a problem because, as you might expect, Canada doesn't grow much in the winter," he said.
The U.S. portion of its business, which includes Pinkberry, Cold Stone Creamery, Wetzel's Pretzels and Sweet Frog, is also unlikely to be unscathed.
Some 57 per cent of MTY restaurants are in the U.S., where the company makes 66 per cent of its sales.
"A little bit" of packaging for those U.S. restaurants are shipped in from outside of the country.
Steel and aluminum tariffs may also weigh on equipment they source.
Overall, Lefebvre said, "There might be some impacts there, but the impact is not super drastic."
Lefebvre's remarks were made on a call discussing the company's fourth quarter performance.
The period ended Nov. 30 brought a loss of $55.3 million or $2.34 per diluted share as it was hit by one-time impairment charges of $64.6 million related to performance at Papa Murphy's.
The pizza brand had a lower-than-expected performance and has curtailed its expectations for future growth.
MTY said its loss compared with a profit of $16.4 million or 67 cents per diluted share a year earlier.
Revenue for the quarter totalled $284.5 million, up from $280.0 million.
The results pushed MTY's share price down almost 11 per cent to $44.57 in Friday afternoon trading.
The quarter left the company with 7,079 restaurants, with 96.4 per cent franchised or under operator agreements.
Most were also located in street front properties with only 16 per cent in office towers, food courts and shopping malls.
While they might be the heart of the business, Lefebvre said a lot of change was also happening at headquarters.
"2024 was a year of adjustments for MTY," he said, noting it carried out a restructuring that eliminated several senior positions and redefined others.
"Our industry is changing at a fast pace and it was important for MTY's present and future success to have the right structure and, more importantly, the right talent in the right position."
Moving forward, he expects the company to see some stability from its cost savings measures.
In the span after the fourth quarter ended, Lefebvre said MTY said the Canadian portion of its business has been "doing exceptionally well," but the U.S. is "lagging a little bit."
He attributed the disparity to unexpected weather south of the border.
"There's been the fires in California. There's been snowstorms that affected regions that don't normally get snow and cold, with Texas and Louisiana and Florida being affected with snow and cooler than normal weathers as well," he said.
"Considering that we're selling a lot of ice cream and frozen yogurt and smoothies, it's not necessarily good for business."
This report by The Canadian Press was first published Feb. 14, 2025.
Companies in this story: (TSX:MTY)
Tara Deschamps, The Canadian Press
