News
Burger King Q1 net down 6 percent
October 28, 2009
Burger King Holdings Inc. has reported that the company continues to be impacted by adverse macroeconomic conditions, with global same-store sales down 2.9 percent for the first quarter ended Sept. 30 compared to 3.6 percent growth in the same period last year.
Comps were negatively impacted by continued record levels of unemployed and underemployed workers, more consumers eating at home and significant competitive discounting. However, the company posted positive comparable sales of 1 percent in its business segment in Europe, the Middle East, Africa and Asia Pacific (EMEA/APAC ) vs. a strong prior year comps growth of 4.8 percent. Leading this performance were the United Kingdom, Australia, Korea and New Zealand, offset by negative comps in Germany.
Comps in the United States and Canada were down 2.8 percent in constant currencies — reflecting industry trends. According to The NPD Group Inc., which prepares and disseminates CREST data, U.S.quick-service restaurant traffic fell 3 percent versus a year ago in the quarter ended August 2009.
Total revenues were down 5 percent to $636.9 million for the quarter, compared to $673.5 million in the same period last year. The decrease in total revenues was primarily attributable to $20.9 million of unfavorable impact from foreign currency exchange rates and lower comparable sales. These factors were partially offset by a net increase in the number of franchise restaurants during the trailing 12-month period ended Sept. 30, according to an earnings release.
Net income was down 6 percent to $46.6 million, compared to $49.8 million in the same period last year.
The company did experience solid development growth across all business segments, with its net restaurant count up by 58 due primarly to international market growth.
First quarter highlights
While the company continued to face a challenging economic and consumer environment, it did improve restaurant margins through decreased commodity costs in the United States and Canada and improved U.S. variable labor costs. Additionally, the company continued to execute on its barbell menu strategy and development growth plans, including opening more stores in the 20/20 upscale prototype and a new Whopper Bar in Singapore.
Marketing efforts included:
- In the U.S. and Canada, a continued focus on value with the $1 Whopper Jr. sandwich and value promotions, such as 2 for $4 Original Chicken sandwiches, Whopper sandwiches and BK Big Fish sandwiches across many markets. Additionally, the $1 quarter-pound Double Cheeseburger was featured in approximately 25 percent of U.S. restaurants. The company also conducted its semi-annual direct mail coupon drop to 80 million U.S. households and continued to innovate around the snacking category, with offerings such as the Cup Cake BK Sundae Shake and improved BK Joe and Mocha BK Joe coffees.
- EMEA/APAC continued to offer value- and quality-focused items, such as King Deals and the Whopper sandwich and Whopper Jr. sandwich value meals. The Latin America business segment also was heavily value focused and featured the Come Como Rey (Eat Like a King) and "King Ofertas" (King Deals) everyday value menus, as well as discounted Family Meal bundles.
- Additional marketing efforts in the first quarter included SuperFamily promotions such as G.I. Joe, Cloudy with a Chance of Meatballs and Transformers 2, which were leveraged across many international markets as well as the September U.S. campaign with NASCAR Sprint Cup Series driver Tony Stewart, which showcased the Whopper sandwich.
"While we continue to operate in a rapidly changing and difficult consumer environment, our business model remains solid as we manage the brand for the long-term," said chairman and CEO John W. Chidsey.
Looking ahead
Chidsey said the company's product offerings will continue in its barbell strategy, including the $1 quarter-pound Double Cheeseburger for consumers focused on value as well as indulgent menu items like the new Steakhouse XT burger, which will launch in all U.S. markets in February with the systemwide implementation of its new batch broilers.
Chidsey concluded: "While we expect that the unpredictable consumer environment will persist in fiscal 2010, we intend to continue to execute on the four pillars of our True North plan of growing the brand, running great restaurants, investing wisely and focusing on our people.
"We are clearly not where we want to be as it relates to comparable sales and overall profitability. We are, however, managing the brand for the long-term, strategically positioning the company for the future when we return to a more normal consumer environment."
Burger King Holdings' first quarter earnings webcast will be available for replay at the company's investors' Web site for 30 days.
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