Recent sales data from the Keg Royalties Income Fund (KRIP) shows the high-flying loonie hurts consolidated revenue for Canadian companies that have U.S. operations.
On July 20, the Canadian dollar hit its highest level against the U.S. dollar in almost two years, before settling back to US$1.0555.
The same day the loonie peaked, the Keg (TSX:KEG.UN) released sales figures for the 13-week period that ended July 3.
The Keg also noted that the average exchange rate for each American dollar moved to $0.97 in the 13 weeks ended July 3, compared with $1.03 in the same 13-week period last year.
Same-store sales at Keg restaurants increased by 1.8% in Canada and by 3.8% in the U.S. in that 13-week period.
However, when Keg accountants converted U.S. sales into Canadian dollars, consolidated same-store sales increased by 1.4% for the 13-week period.
“We are very pleased with the Keg's continued positive sales performance during the quarter in both Canada and the U.S.,” said KRIP chairman Kip Woodward.
The fund’s CEO, David Aisenstat, is on a medical leave after what was described as an accident in his home in early June, and was unavailable for comment.
The complex arrangement between Aisenstat and KRIP goes back to May 31, 2002, when KRIP, through a subsidiary, bought Keg trademarks and other property from Keg Restaurants Ltd. (KRL), which Aisenstat continues to own.
KRIP then granted KRL an exclusive licence to use Keg trademarks for 99 years subject to a licence and royalty agreement.
The agreement obligates KRL to make monthly royalty payments to KRIP equal to 4% of gross sales of specified Keg restaurants in Canada and the United States.
About 88 of Aisenstat’s 104 Keg restaurants are in Canada. (See: “Keg owner not interested in buying Morton’s” – BIV Business Today; March 18.)
He also owns Ki modern japanese + bar, Hy’s Steakhouse and Cocktail Bar and the Shore Club.
Glen Korstrom
Twitter: GlenKorstrom