Shares of Quebec-based restaurant franchisor MTY Food Group Inc. (TSX: MTY) fell on Friday, despite the company reporting a sharp jump in its first-quarter profit. The company, which owns popular brands such as Cold Stone Creamery, Mr. Sub, and Thai Express, posted a net income of approximately $37 million for the first quarter of 2026. This represents a substantial increase from the same period last year, surprising many analysts who had braced for a more muted performance given the current inflationary pressures on the fast-food industry.
The primary driver behind this bottom-line success was, however, significant foreign exchange gains, which provided a massive tailwind for the firm’s international operations. MTY actually missed consensus revenue estimates as it saw a noticeable decline in corporate store sales, particularly within its United States division. Management noted that while consumer traffic remains steady in Canada, the U.S. market has become increasingly competitive as households tighten their discretionary spending. Same-store sales, which are a key metric for restaurants, were down 2.5% year over year, which is a troubling sign for the business.
Investors seem unimpressed with the “quality” of the earnings, as the profit jump was fueled more by non-operating items than by organic sales growth. There are some big questions that loom over how the business may perform in the near term, as even at a low valuation, investors haven’t been loading up on the stock.
With a diverse portfolio of over 80 brands, MTY remains a big player in its industry. However, it’s been struggling and its shares are down more than 30% over the past five years. It does, however, offer investors an attractive payout as it yields 3.7%.