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Sonic's Retro Boom
January 3, 2005
January 4, 2005Throwback jerseys and comic-book movies aren't the only things cashing in on the retro revival. Sonic (Nasdaq: SONC) is growing nicely, as its carhops -- on foot or on roller skates -- delivering flavored sodas and fried grub to their parked patrons recall a long-gone era. On the heels of a robust 8.1% spike in fiscal first-quarter comps, the company saw its sales climb by 20%, to $142.2 million. Margins were kind, pushing profits 24% higher for a $0.26-a-share showing. 
The concept's popularity has been contagious; the number of Sonic locations has grown from 2,743 to 2,917 units over the past year. Unlike the lessons learned from specialty retailer Hot Topic (Nasdaq: HOTT), which was expanding aggressively despite a slump in same-store sales, you have to like a company taking advantage of higher traffic by growing its empire. In Sonic's case, the drive-in dining concept is clearly in fashion, even as drive-in theaters continue to give way to suburban multiplex cinemas. In fact, what's really impressive about the company's 8.1% uptick in the November quarter's comps is that it came stacked on a healthy 6.2% improvement a year earlier.So is it the rustic charm of pushing a button and ordering up a chili dog, some taters, and a limeade that's driving Sonic to higher ground? After all, didn't McDonald's (NYSE: MCD) turn itself around when it moved away from pitching its retro fried foodstuffs in favor of healthier salads and chicken-breast sandwiches? Actually, the breakthrough at Mickey D's was more complicated than just that. In fact, unhealthy comfort food isn't exactly going away. Steak n Shake (NYSE: SNS) knows all about that. Anyone who argued that higher gas prices or carb-counting diet trends would keep folks away from places like Sonic missed, even as those trends may have played a small part in the Krispy Kreme (NYSE: KKD) debacle last year. Yes, some may see Sonic's approach to fast food as a novelty, and we're a fickle lot. Like bargain eats specialist Checkers (Nasdaq: CHKR), we may all one day tire of eating outside the air-conditioned box. But that time clearly isn't coming any time soon. Sonic is looking to grow earnings by at least 18% in the current quarter, with sales climbing 13% to 15% higher. As a tempting kicker, those targets were set with the same assumption of 2% to 4% growth in same-store sales that the company has historically aimed for -- and we already know how those marks were topped in the first quarter. Find yourself craving a Frito pie or one of Sonic's slushes, and then regretting it when you get home and face the scale? How are those resolutions for 2005 going so far? All this and more -- in the Fools Fighting Fat Discussion Board. Only on Fool.com. Longtime Fool contributor Rick Munarriz did hit a Sonic just outside Haines City last week and can't wait for one to open closer to his Miami homestead. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
The concept's popularity has been contagious; the number of Sonic locations has grown from 2,743 to 2,917 units over the past year. Unlike the lessons learned from specialty retailer Hot Topic (Nasdaq: HOTT), which was expanding aggressively despite a slump in same-store sales, you have to like a company taking advantage of higher traffic by growing its empire. In Sonic's case, the drive-in dining concept is clearly in fashion, even as drive-in theaters continue to give way to suburban multiplex cinemas. In fact, what's really impressive about the company's 8.1% uptick in the November quarter's comps is that it came stacked on a healthy 6.2% improvement a year earlier.So is it the rustic charm of pushing a button and ordering up a chili dog, some taters, and a limeade that's driving Sonic to higher ground? After all, didn't McDonald's (NYSE: MCD) turn itself around when it moved away from pitching its retro fried foodstuffs in favor of healthier salads and chicken-breast sandwiches? Actually, the breakthrough at Mickey D's was more complicated than just that. In fact, unhealthy comfort food isn't exactly going away. Steak n Shake (NYSE: SNS) knows all about that. Anyone who argued that higher gas prices or carb-counting diet trends would keep folks away from places like Sonic missed, even as those trends may have played a small part in the Krispy Kreme (NYSE: KKD) debacle last year. Yes, some may see Sonic's approach to fast food as a novelty, and we're a fickle lot. Like bargain eats specialist Checkers (Nasdaq: CHKR), we may all one day tire of eating outside the air-conditioned box. But that time clearly isn't coming any time soon. Sonic is looking to grow earnings by at least 18% in the current quarter, with sales climbing 13% to 15% higher. As a tempting kicker, those targets were set with the same assumption of 2% to 4% growth in same-store sales that the company has historically aimed for -- and we already know how those marks were topped in the first quarter. Find yourself craving a Frito pie or one of Sonic's slushes, and then regretting it when you get home and face the scale? How are those resolutions for 2005 going so far? All this and more -- in the Fools Fighting Fat Discussion Board. Only on Fool.com. Longtime Fool contributor Rick Munarriz did hit a Sonic just outside Haines City last week and can't wait for one to open closer to his Miami homestead. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.Related Media
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