Burger King
Written on February 1, 2008
Burger King Holdings Inc. said Thursday its second-quarter profit jumped 29% as the stalwart Whopper, the new Homestyle Melt and promotions with TV tie-ins gave a boost to worldwide sales at stores open at least a year.
Net income for the world’s No. 2 hamburger chain rose to $49 million, or 36 cents per share, from $38 million, or 28 cents per share in the prior year quarter. Analysts polled by Thomson Financial expected earnings of 32 cents per share.
Revenue rose 10% to $613 million from $559 million in the second quarter of 2007. Analysts predicted revenue of $597.1 million.
Worldwide same-store sales, or sales at locations open more than a year, rose 4.4%. Same-store sales are a key indicator of performance. Competitor and industry leader McDonald’s Corp (MCD, Fortune 500). said Monday its same-store sales were flat in December, and up only 1.5% so far in January.
Average restaurant sales increased 8% to $1.25 million, compared with $1.16 million for the prior year’s second quarter.
"Our results this quarter substantiate our ability to outperform the restaurant industry despite macroeconomic pressures," Chief Executive Officer John Chidsey said. "The third quarter is off to a great start with strong January comps driven by traffic."
Miami-based Burger King attributed the rise in same store sales to its value menu, the success of sandwiches like the Whopper, and a promotional campaign featuring SpongeBob’s Atlantis Squarepants pay day loans. The chain also saw a boost in sales from breakfast and late-night foods and the launch in the U.S. and Canada of Homestyle Melts.
The company has followed a strategy of opening new restaurants, closing underperforming ones and attracting customers through aggressive television marketing.
In the second quarter, Burger King (BKC) increased its worldwide restaurant count by 105. During the first six months of its fiscal year, the company has opened 112 restaurants, the highest net restaurant growth in six years.
The company said it expects 2008 earnings per share to exceed $1.24 per share. Analysts forecast a profit of $1.29 per share.
Citigroup Investment Research analyst Glen Petraglia has said Burger King and other fast-food chains will fare better in the current U.S. economy than they did in the recession of the early 1990s.
Burger King has faced pressure from a coalition of farm workers, which asked the chain and its suppliers to increase wages for tomato pickers by a penny per pound. Burger King and the Florida Tomato Growers Exchange have refused the deal, which McDonald’s and Yum Brands Inc (YUM, Fortune 500). have accepted.
Burger King operates more than 11,300 restaurants worldwide. About 90 percent of its restaurants are owned and operated by independent franchisees.
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