Popeyes outpacing fast-food chicken category

by Monica Watrous
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ATLANTA — A four-pillar plan propelled Popeyes Louisiana Kitchen, Inc. to double-digit gains during the fast-food chain’s first quarter.

Despite severe winter weather and heightened competitive activity, Popeyes posted an 11 percent increase in total system-wide sales and approximately 16 percent growth in net income and total revenues. Domestic same-store sales grew 4.3 percent during the quarter.

“Popeyes has now achieved positive domestic same-store sales growth for 16 consecutive quarters,” said Cheryl Bachelder, CEO, during a May 29 call with financial analysts. “We’ve outperformed the chicken QSR category for 24 consecutive quarters, and we’ve outpaced the broader quick-service restaurant category for the last 10 quarters.”

Brand development is the first prong of Popeyes’ strategic roadmap, underpinned by a strong promotional calendar of menu innovation and value deals. First-quarter offers pushed Popeyes’ share of the chicken quick-service restaurant category to just over 22 percent, compared with less than 15 percent share in the first quarter of 2008, the company said.

Popeyes’ second strategic priority involves improving customer experience, in part with remodeled restaurants. At the end of the quarter, more than 65 percent of domestic units had been reimaged, with a total of 80 percent expected by the end of the year.

“We believe that a portion of our performance reflects the change in guest perception of our brand brought about by the new environment of our restaurants,” Bachelder said.

Growing restaurant profits is the chain’s third prong, and Popeyes said it has achieved five consecutive years of increased profit dollars for its restaurants. Moderating commodity costs during the quarter combined with strong top-line sales and supply chain savings were expected to generate higher restaurant operating profits for domestic franchisees compared to last year, Bachelder said.

The fourth pillar of Popeyes’ plan focuses on developing new restaurants with careful real estate selection. During the quarter, the company opened 27 new restaurants, including 19 domestically, for a total of 2,248 worldwide.

“Fueling our domestic development is the performance of our new restaurants,” Bachelder said. “Looking at the 2012 group of new domestic free-standing restaurants, they are averaging first-year sales of $1.6 million, compared to the average of all of our domestic free-standing restaurants of approximately $1.3 million. This continuing trend reflects our commitment to higher-quality site selection, and the extent to which our brand-building efforts have created pent-up demand in new and under-penetrated markets.”

As beef and seafood prices spike, Popeyes said it is prepared for more promotional chicken activity in the market.

“What we always focus on is making sure our new product news and our pricing is sharp up against those competitors, so that we have the share advantage when the chicken category gets active…” Bachelder said.

For the first quarter ended April 20, Popeyes had net income of $11.1 million, equal to 47 cents per share on the common stock, up 16 percent from $9.6 million, or 41 cents per share, in the prior-year period. Revenues totaled $70.1 million, a 16 percent increase from $60.4 million in the comparable quarter.
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