Thursday, fast food restaurant operator Burger King Holdings Inc. (BKC) reported a 42% surge in its profit for the fourth quarter, driven by 9% revenue growth on the back of new restaurant openings and a more than 5% increase in comparable sales. Adjusted earnings per share for the quarter climbed 28% and beat analysts' consensus estimate by three cents. The company also provided earnings per share outlook for fiscal year 2009 within analysts' estimates.
Fourth Quarter Results
The world's second-largest hamburger chain said that its net income for the fourth quarter increased to $51 million, or $0.37 per share, from $36 million, or $0.26 per share, in the same quarter last year.
Results for the year-ago period include a pre-tax unusual item of $7 million, or $0.03 per share, related to the termination of the company's lease for a new headquarters facility which the company had proposed to build in Coral Gables, Florida. There were no adjustments to these measures for the latest quarter.
On an adjusted basis, net income for the latest quarter was $51 million, or $0.37 per share, compared to net income of $40 million, or $0.29 per share a year ago. On average, eleven analysts polled by First Call/Thomson Financial expected the company to report earnings of $0.34 per share.
Revenues for the quarter increased 9% to $646 million from $590 million in the prior-year quarter. Wall Street analysts expected revenues of $634.64 million.
Peer Performance
In July, one of Burger King's peers, McDonald's Corp. (MCD), reported a profit for the second quarter of $1.19 billion, or $1.04 per share, compared to loss of $711.7 million, or $0.60 per share in the year-ago period. The Illinois-based company had recorded a charge in the year-ago period of about $1.6 billion related to the sale of certain of its Latin American and Caribbean businesses. Revenues for the quarter increased 4% to $6.08 billion from $5.84 billion in the comparable quarter a year ago.
Another peer, Ohio-based Wendy's International Inc. (WEN) reported a 32% drop in its profit for the second quarter to $19.9 million, or $0.22 per share, from $29.2 million, or $0.33 per share in the prior-year period. Results for the latest quarter were negatively impacted by declining sales and rising commodity costs in addition to restructuring charges and expenses on a special committee formed a year ago to study alternatives.
Other Metrics
The increase in Burger King's revenues was driven by strong worldwide comparable sales and substantial net restaurant expansion. Revenues for the quarter also increased due to an increase in effective royalty rates, primarily in the U.S. and Canada, and the favorable impact of foreign currency exchange rates.
Traffic and sales increased worldwide, resulting in comparable sales growth of 5.3% for the quarter. In the U.S. and Canada, the company recorded a 5.5% increase in comparable sales.
Company restaurant revenues for the quarter increased 9% from the previous-year quarter to $471 million, while franchise revenues climbed 13% to $143 million. Property revenues increased 3% to 32 million.
Restaurant operating margin for the quarter declined to 13.1% from 14.8% in the prior-year quarter on higher commodity costs and expenses related to the company's U.S. and Canada reimaging program. These additional costs were partially offset by significantly improved margins in the EMEA/APAC and Latin America reporting segments, driven by strong comparable sales.
Income from operations for the latest quarter was $82 million, up 14% from $72 million in the prior-year period.
Worldwide fourth-quarter average restaurant sales, or ARS, increased 9% from the prior-year quarter to $338 thousand.
During the quarter, the company opened a net 110 restaurants worldwide, the largest number of quarterly net restaurant openings in seven years. In April, the company acquired 56 restaurants located in the Carolinas from one of its largest franchisees, Heartland.
Burger King said it completed its reimaging work on 32 restaurants in the U.S. and currently has 19 units in progress. The company expects to reimage a total of 39 restaurants during fiscal year 2009.
Commenting on the results, John Chidsey, Chairman and Chief Executive Officer of Burger King said, "Our strong quarterly and annual performance confirms the strength and the momentum of our worldwide business. Throughout the quarter, we drove strong comparable sales by continuing to leverage our products and promotions across many markets, including the launch of the Indy Whopper sandwich in connection with the Indiana Jones blockbuster movie, The Kingdom of the Crystal Skull."
Miami, Florida-based Burger King has extended hours of operations in its U.S. restaurants in May, enabling it to capture a larger market share of breakfast and late-night. The company also increased its SuperFamily traffic with adventure-filled promotions, including the Incredible Hulk, Iron Man and SpongeBob's Pest of the West.
In the Europe, Middle East and Africa region, or EMEA, the company responded to consumer demand for high-margin indulgent products, including the Steakhouse Burger platform and New York Steak Sandwich. In the Asia-Pacific region, or APAC, the company focused on Value Snacking Menu and the launch of its breakfast platform in New Zealand. In Latin America, the company featured products such as its BK Stacker Sandwich and Steakhouse platform.
Full-Year Results
For fiscal year 2008, Burger King's net income climbed 28% to $190 million, or $1.38 per share, from $148 million, or $1.08 per share in the previous year.
Adjusted net income for the year increased to $190 million, or $1.38 per share, from $152 million, or $1.11 per share a year ago. Analysts expected earnings of $1.35 per share for the year.
Revenues for the year increased 10% to $2.46 billion from $2.23 billion in the prior year. Wall Street analysts had a consensus revenue estimate of $2.45 billion for the year.
The company opened 282 new restaurants during the fiscal year, net of closures.
Outlook
For fiscal year 2009, Burger King forecasts earnings per share in a range of $1.54-$1.59. Analysts expect the company to report earnings for the year of $1.56 per share.
Stock Quotes
BKC closed Wednesday's regular trading session at $27.45, up $0.32 on a volume of 2.08 million shares. In the 52-week period, the stock has been trading in a range of $21.60-$30.95.
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