Sonic's pipeline packing heat and sweet
March 25, 2014
by Monica Watrous
OKLAHOMA CITY — Coming to a Sonic Drive-In near you: Chocolate jalapeño milkshakes. The new flavor was one of the forthcoming innovations discussed by Sonic Corp. during the company’s second-quarter earnings call with financial analysts on March 24.
“We continue to focus on new product news,” said Cliff Hudson, chairman, president and CEO. “…it’s very much a part of our DNA, helps drive sales across all five day parts. This spring and summer will be no different.”
As part of the chain’s annual summer shake promotion, which last year featured a peanut butter bacon shake, a total of 25 flavors will return or debut, including chocolate jalapeño and salted caramel. New this year is a summer slush promotion, which will feature 25 new varieties of slushes.
Recent launches from the chain have included a chili cheese pretzel dog, sweet and spicy habanero chicken sandwiches and limited-time mint chocolate and red velvet additions to its molten cake sundae lineup. Lunch represents the strongest day part for Sonic, followed by afternoon, dinner, evening and morning.
“One of the nice things I think about the path we’re on, it really does leverage the core nature of the business – whether we’re focusing on real ice cream, desserts or premium chicken products, that we’re now promoting more often, or iced tea,” Hudson said. “It's our view that we can really set our brand apart from a lot of our competition with our ability to provide these high-quality new products, but we can do so on par with fast-casual or even casual-dining restaurants, and we can do so across multiple day parts. This is something I think really distinguishes us from most of our QSR competition.”
Innovation contributed to a solid second-quarter for the company, which overcame adverse weather to deliver a 1.4 percent system-wide same-store sales increase. A stronger promotional pipeline, the implementation of strategic pricing and a shift in advertising dollars to national media boosted the brand among quick-service competitors in the quarter, Hudson said.
Sonic also has seen an increase in traffic and higher customer service scores where it has added a new point-of-personalized-service system, which promotes upsells based on a user’s order.
“And our view is, this POPS system, combined with the physical drive-in format, is going to allow us to engage the customer using mobile technology and social media, engage in on-lot and off-lot, and really heighten the distinctive and differentiated nature of our concept, versus our competition,” Hudson said.
Sonic said it expects to complete its implementation of the point-of-personalized-service system in all company-owned stores by June. Additionally, a new point-of-sale system will be rolled out to all company-owned stores by next month.
Net income for the quarter ended Feb. 28 increased 15 percent to $4,107,000, equal to 7 cents per share on the common stock, from $3,577,000, or 6 cents per share, in the prior-year period. Revenues totaled $109,741,000, down 1.3 percent from $111,141,000 the year before.
“We are pleased with the results of the second quarter, and particularly in light of the external challenges, the severe weather in so many parts of our country, during those winter months,” Hudson said. “Apart from those days affected by the weather, our business trends remain strong, and we’re looking at the second half of our fiscal year with a lot of confidence and excitement about our business.”