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Investors indulged in shares of fast-food companies Wednesday to boost the sector after three of
October 12, 2004
CHICAGO (CBS.MW)-- Investors indulged in shares of fast-food companies Wednesday to boost the sector after three of the nation's largest said consumers were chomping away at both burgers and salads. In the past two days, McDonald's Corp., CKE Restaurant Inc. and Sonic Corp. each said that traffic and sales were robust as customers responded well to new menu items, discounts and other promotional activities. Analysts believe that the better-than-expected results are also indicative of an improving economy. "Clearly, the customer is going back to quick-service restaurants," said Dean Haskell, restaurant analyst at JMP Securities LLC. "We're in a recovery that's firming up. It's not a great recovery, but QSR always is the first to respond to a recovery." McDonald's (MCD: news, chart, profile), the nation's largest maker of hamburgers and French fries, outsized itself with double-digit gains in sales at U.S. stores despite tough comparisons to last year to fuel a better-than-expected profit projection for the third quarter. The Oak Brook, Ill.-based chain served up September sales that were 10.6 percent higher in the U.S., good enough to offset the flat same-store sales results in Europe. See full story. Analysts believe that the higher earnings will come from stronger margins out of the U.S. business as the company pushed cheaper Happy Meals with the purchase of a salad as well as new salad entrees and promotions such as replacing the super-sized menus offerings with slimmer and healthier portions. McDonald's, a Dow Jones Industrials component, rose $1.31, or 4.8 percent, to $28.86.
At CKE (CKR: news, chart, profile), parent of Carl's Jr. and Hardee's, same-store sales -- an important industry benchmark -- in September were 8.8 percent higher at Carl's Jr. and 5.1 percent higher at Hardee's. At Carl's Jr., customers were particularly partial to a new breakfast burrito and a guacamole bacon chicken sandwich, while Hardee's hit both ends of the spectrum with "breakfast bowls" -- one low in carbohydrates and another jammed with them, the latter called, appropriately, the "Loaded Biscuit and Gravy" version. See full story. CKE shares tacked on 65 cents, or 5.6 percent, to $12.25. Sonic (SONC: news, chart, profile) reported a same-store sales jump of 8.8 percent systemwide -- its biggest growth rate in five years. The higher sales at the nation's largest drive-in chain offset higher food and packaging costs for what the company called a "significant increase in average drive-in profits." More promotions and a sales-incentive planned across the system also helped.
Sonic gained $1.22, or 4.8 percent, to $26.44. Earlier this month, Yum Brands Inc.(YUM: news, chart, profile) beat Wall Street's third-quarter expectations as international sales helped lift overall profits for the parent of KFC, Taco Bell and Pizza Hut. See full story. Yum shares gained 29 cents to $42.21. Upping the menu offerings is also helping sales at Wendy's (WEN: news, chart, profile) and Jack in the Box (JBX: news, chart, profile). Both stocks moved higher Wednesday with the sector. Wendy's was up $1.32, or 3.9 percent, to $35.08, while Jack in the Box added 17 cents to $32.62.
Einstein Bros. Bagels moving beyond bagels into fast-casual
Einstein Bros. Bagels stores will be changed to Einstein Bros. Cafés over the next three years.
October 15th, 2004Einstein's parent company, Golden, Colo.-based New World Restaurant Group Inc., will launch the new concept next week in Denver. Plans call for most of Einstein's bagel shops nationwide to be converted to cafes by the end of 2007. With the change, all 370 company-owned Einstein's restaurants will become fully fast casual. Fast-casual restaurants -- where consumers can get quick, affordably priced, healthy meals in a casual atmosphere -- is one of the country's hottest dining trends. This compares to the St. Louis-based Panera Bread, which is a popular fast-casual restaurant chain. This is the first major move of any brand to make a clear and focused decision to shift its market approach. Though San Diego based Jack in the Box has entered the fray with the creation of their own Fast-casual theme known as JBX the Einstein move is a big statement in the industry. Steve Marcum of BMG Consulting an industry expert group, expects more brands to continue to shift to the Fast-casual concepts. As the consumer market ages and the fact that the younger consumers are seeking style in their dining experience, the Fast-casual themes will continue to do well.
New World declined to say how much the Einstein's rebranding will cost. Einstein's restaurants will get a new logo, interior and exterior design, streamlined ordering system and seasonal menu, as well as the new name. Dine-in meals now will be served on china with flatware, and beverages will come in coffee mugs and glasses.
