Burger King 1Q net income jumps 82 per cent on higher sales in North America

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This article was published 01/11/2006 (7237 days ago), so information in it may no longer be current.

MIAMI (AP) – Burger King Holdings Inc. (NYSE:BKC), the world’s second-largest burger chain, on Wednesday said its first-quarter earnings jumped 82 per cent, due to North American growth driven by sales of Value Menu items and the Stacker sandwich and new restaurant openings. Its shares climbed more than eight per cent.

For the quarter ended Sept. 30, its profit totalled $40 million, or 30 cents per share, up from $22 million, or’ cents per share, a year ago. Excluding costs related to management fees, franchise system distress and the tax effects of unusual items, net income was 26 cents per share in the latest period.

The Miami-based company’s revenue rose eight per cent to $546 million from $508 million last year.

Analysts polled by Thomson Financial expected a profit of 26 cents per share on revenue of $538.1 million.

Burger King shares rose $1.12, or 6.7 per cent, to close at $17.90 in trading on the New York Stock Exchange.

Same-store sales, or sales in stores open at least one year, a widely used industry gauge of performance, grew 2.6 per cent in North America and 2.4 per cent worldwide.

North America sales were driven by the BK Stacker, a type of bacon cheeseburger, BK Value Menu items and growth in business during breakfast. Premium products drove sales in Latin America and Europe.

Chief executive John Chidsey said the earnings results “speak to the resurgence of the Burger King brand and its underlying reach to consumers.”

In a conference call, Chidsey said that a five per cent increase in traffic at restaurants was fuelled by the value menu with items typically priced near a dollar, new chicken products and promotions with the NFL and NASCAR. Also, franchisees helped the cause by increasing local investment and extended hours.

“Traffic continued to increase in the restaurant as gas prices declined and consumers regained confidence,” Chidsey added.

For its full 2007 fiscal year, the company expects revenue growth between six per cent and seven per cent and adjusted earnings growth between 10 per cent and 12 per cent.

Burger King, which went public in May, also reported $50 million in retired debt using cash it generated from operations and said it aimed to continue to reduce debt. The fast food chain said it has retired $435 million in debt, a 30 per cent reduction in total debt since its initial public offering.

The company has reported 11 straight quarters of worldwide same-store sales growth. Its net income includes $17 million in unusual items in the prior year, including $13 million in costs related to early debt retirement.

The company’s efforts at expansion in the past 12 months also were mentioned as a reason for the strong earnings, with 101 new restaurant openings in Europe, the Middle East and Asia’s Pacific region, and 90 new restaurant openings in Latin America in the past 12 months. There are more than 11,100 Burger King restaurants worldwide, second to McDonald’s Corp.

Chief financial officer Ben Wells said the company was considering other uses for its cash, including “strategic investments to grow the brand as well as returning it to shareholders in the form of dividends or share repurchase programs.”

One soft spot for Burger King has been in the United Kingdom, where public concern about obesity and food-borne illness affected business. The company spent $3 million to make management changes and reassess strategies there.

“McDonald’s has done a better job in the UK than we have,” Chidsey said. “I just think McDonald’s is six or seven months ahead of us.”