MTY Food Group closes 68 stores as Q2 sales decline
MTY Food Group reported a challenging second quarter for fiscal 2026, with net income dropping to $15.4 million and sales falling 8.2% to $279.9 million due to consumer confidence issues. The company plans to close 68 underperforming corporate stores over the next nine months to improve profitability, incurring costs of $10 million to $12 million. Despite the revenue decline, MTY generated strong free cash flow of $32.2 million and maintained a robust development pipeline with expectations for accelerated store openings in the latter half of the year.
*this image is generated using AI for illustrative purposes only.
MTY Food Group reported a decline in financial performance for the second quarter of fiscal 2026, with net income falling to $15.4 million from $57.3 million in the prior year. The company recorded sales of $279.944 million, an 8.18% decrease from the previous year, citing continued consumer confidence issues and softer spending. In response to underperformance, MTY announced plans to close 68 underperforming corporate-owned locations over the next six to nine months, incurring estimated costs between $10 million and $12 million to improve long-term profitability.
Financial Performance
Revenue decreased 8.2% to $279.9 million, driven by lower revenue from corporate stores and turnkey projects. Normalized adjusted EBITDA fell to $60.2 million, a decrease of $9.8 million year-over-year, primarily due to reduced profitability in corporate operations and commodity cost pressures. Cash flows provided by operating activities increased 25% to $43.0 million, while free cash flows net of lease payments rose to $32.2 million. MTY declared a quarterly dividend of $0.37 per share, payable on August 14, 2026.
Operational Highlights
MTY's network comprised 7,040 locations at the end of the quarter, with 6 net store openings during the period. System sales totaled $1.4 billion, a decrease of 3.5%, while same-store sales declined 2.1%. Digital sales remained resilient at $284.2 million, representing 20.7% of total system sales. Management noted that same-store sales trends improved sequentially in June, particularly in Canada, while the US faced challenges in the pizza segment.
Strategic Actions
Following a detailed review, MTY announced the closure of 68 underperforming corporate-owned stores. The closures, which include a significant number of Papa Murphy's locations, are expected to take between six and nine months to complete. The company estimates these stores lost over $10 million in the last 12 months. The initiative aims to reduce losses and improve the quality of the corporate store portfolio. MTY also reimbursed $15.7 million of long-term debt during the quarter.
Segment Performance
Franchise segment revenues declined 4% to $98.6 million, with normalized adjusted EBITDA decreasing to $50.9 million. Corporate segment revenues fell 15% to $111.7 million, with normalized adjusted EBITDA dropping to $5.7 million. The food processing, distribution, and retail segment reported a 2% revenue decrease to $39.3 million, with margins impacted by inflationary pressures on proteins.
| Financial Highlights (in thousands of $) | 13 weeks ended May 31, 2026 | 13 weeks ended May 31, 2025 |
|---|---|---|
| Revenue | 279,944 | 304,874 |
| Normalized adjusted EBITDA | 60,229 | 70,021 |
| Net income attributable to owners | 15,449 | 57,289 |
| Cash flows from operations | 43,029 | 34,357 |
| Free cash flows net of lease payments | 32,198 | 17,819 |
| System sales | 1,411,600 | 1,463,500 |
How will the closure of 68 corporate locations, particularly Papa Murphy's, impact MTY's market share in the competitive pizza segment?
Will the sequential improvement in same-store sales trends in June continue into the second half of fiscal 2026?
How does MTY plan to offset the margin pressures in the food processing segment caused by inflationary protein costs?
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