News
Popeyes FY 09 comps outpace QSR industry
March 10, 2010
While a number of quick-service chains have reported negative same-store sales, Popeyes Louisiana Kitchen's fiscal 2009 comps improved over last year, according to parent company AFC Enterprises Inc.'s financial results for the period ended Dec. 27, 2009.
Full-year systemwide comps were up 0.7 percent compared to a 1.7 percent decrease last year. Total domestic same-store sales increased 0.6 percent, compared to a 2.2 percent decrease last year, outpacing both the QSR and chicken QSR categories. International same-store sales increased 1.9 percent, compared to a 4.1 percent increase last year, the third consecutive year of positive same-store sales.
For the fourth quarter, comps were down slightly but still improved over the same period last year. Systemwide comps were down 1 percent, compared to a decline of 2.1 percent in the same period last year. Company-operated stores comps were down 1.3 percent, compared to negative 5.9 percent in the same period last year, while domestic franchise comps were down 1 percent, compared to a decline of 2.7 percent last year. International comps were down 1 percent compared to a gain of 4.1 percent in the same period last year.
In 2009, Popeyes promoted its famous Bonafide bone-in chicken and seafood offerings at compelling price points. These promotions, which were supported by national media advertising, delivered positive guest counts and positive same-store sales, according to a news release.
International comps for the year were led by strong sales in Korea, Canada, Turkey and overseas U.S. military bases, partially offset by negative performance in Latin America and the Middle East. Similar to its efforts in the United States, the company is working with its international franchisees to implement distinctive new products and core menu value promotions to drive traffic gains in the restaurants.
Total revenues for the quarter were down 9.5 percent at $32.5 million, compared to $35.9 million in the same period last year. For the year, revenues were down 11.3 percent at $148.0 million, compared to $166.8 million last year; primarily due to the company's successful re-franchising of 27 company-operated restaurants in Atlanta and Nashville during 2009 and 2008.
The year-over-year impact of re-franchising the company-operated restaurants was favorable to operating profit by approximately $1.7 million, including franchise fees and royalties, general and administrative savings and lower depreciation and amortization.
For the quarter, net income was up 67 percent at $4 million, compared to $2.4 million in the same quareter last year. Net income for the year was $18.8 million, down 3 percent compared to $19.4 million last year.
The Popeyes system opened 95 restaurants in 2009, which included 39 domestic and 56 international restaurants. The number of new restaurant openings was slightly lower than previous guidance of 100-110, due primarily to permit delays. The Popeyes system permanently closed 81 global restaurants in fiscal 2009, resulting in 14 net restaurant openings which exceeded previous guidance of zero to 10 net openings. These closures included 51 domestic and 30 international restaurants. In addition, the company's year-end restaurant count for 2009 includes seven net re-opened restaurants.
On a systemwide basis, Popeyes had 1,943 restaurants operating at the end of fiscal 2009, compared to 1,922 restaurants at the end of last year. Total unit count was comprised of 1,576 domestic restaurants and 367 international restaurants in 27 foreign countries and two territories. Of this total, 1,906 were franchised restaurants and 37 were company-operated restaurants.
"Looking back at the full year 2009, Popeyes delivered impressive performance in relation to the QSR sector on the four metrics of our strategic plan: positive guest traffic, positive gains in the guest experience, positive gains in restaurant operating profit and positive net new units," said AFC Enterprises CEO Cheryl Bachelder in a news release. "We achieved this by staying true to our strategies despite a weak economy. Our shareholders benefited as we exceeded earnings expectations, with adjusted earnings diluted per share up 14 percent compared to last year. I am proud of our entire team's accomplishments.
"In 2010, we will remain focused on the tenets of our plan that have yielded success in the marketplace. As we continue to grow our market share, improve operations and restaurant unit economics, we will be well positioned to accomplish the accelerated new unit growth of our long term plan and deliver strong returns to our restaurant owners and our shareholders."
Strategic plan update
The updates in the company's strategic plan include:.
- In 2009, Popeyes promoted its flavorful Bonafide chicken and seafood offerings at value price points, supported by its successful new Louisiana Fast advertising campaign and national media. These marketing initiatives delivered strong positive guest counts resulting in positive full year same-store sales.
- In 2010, Popeyes will continue to promote its core chicken and seafood offerings and periodically introduce new innovative products. Popeyes will continue the use of national advertising to efficiently expand media reach and build additional brand awareness.
- Popeyes restaurants steadily improved their Guest Experience Monitor (GEM) scores, with "Overall Delighted" and "Intent to Return" scores at the end of 2009 up significantly since the beginning of the year.
- With newly required drive-thru equipment substantially in place throughout the system, the company is rolling out a new speed of service training program system-wide in the first half of 2010. Longer-term, management believes an increase in speed of service will provide a significant benefit to Popeyes customers and restaurant sales performance.
- In 2009, the company successfully completed its re-franchising strategy with the sale of its company-operated restaurants in Atlanta and Nashville. Going forward, the company intends to own and operate its remaining company-operated restaurants in New Orleans and Memphis, which are high volume, profitable stores.
- In 2009, Popeyes restaurants benefited from a 3 percent decrease in commodity costs which translated to approximately a 100 basis point improvement in restaurant operating margins. This overall benefit was partially offset, however, by increases in national minimum wage.
- During 2009, the company also completed a diagnostic analysis of its supply chain system, identifying significant cost-savings opportunities in packaging, shipping, and sourcing alternatives which will benefit the entire system in 2010 and beyond.
- The company is generating a strong pipeline of current and new franchise developers to open new restaurants and enter new markets, and will be better positioned to accelerate new unit development as the economy recovers.
- The company's site modeling software investment is helping to strengthen real-estate site selection by identifying higher quality sites with higher sales volume potential and more attractive returns for its franchise owners.
- The company's new build-out costs remain competitive.
Fiscal 2010 guidance
The company projects global same-store sales to be in the range of negative 1.0 to positive 2.0 percent for 2010, given the continuing challenges of the global economic environment and increased competition on value within the restaurant industry.
With the company's stronger new opening pipeline, Popeyes projects its global new openings to be in the range of 110-130 restaurants in 2010. Similar to the past few years, the company will continue to close underperforming restaurants and enforce higher operating standards throughout the system. As a result, the company projects system-wide unit closings to be approximately 100 restaurants, yielding 10-30 net restaurant openings in 2010. Popeyes restaurant closures typically have sales significantly lower than the system average.
The company expects its fiscal 2010 general and administrative expense rate to be consistent with last year's rate of 3.1-3.2 percent of system-wide sales, among the lowest in the restaurant industry. During 2010, the company will continue to tightly manage general and administrative expenses and invest in its international business and core initiatives of the company's strategic plan, including new product innovation to drive traffic, operational tools and training to improve speed of service, and productivity initiatives to strengthen restaurant profitability. Management believes these strategic investments are essential and beneficial for the long-term growth of the brand.
The company expects 2010 diluted earnings per share to be in the range of $0.73-$0.77, compared to $0.74 last year.
Long-term guidance
Over the course of the next five years, the company believes the execution of its Strategic Plan will deliver on an average annualized basis the following results: same-store sales growth of 1 to 3 percent; net new unit growth of 4 to 6 percent; and earnings per diluted share growth of 13 to 15 percent.
The replay of the company's conference call and internet webcast with the investment community can be accessed via the company's webcast, atwww.afce.com, by selecting "Investor Information" and then "AFC Enterprises Fiscal 2009 Earnings Conference Call." The replay will be available for 90 days at the Company's website or through a dial-in number for a limited time following the call.
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