Burger King posting positive trends in the US
Aug. 1, 2014
by Monica Watrous
MIAMI — Since switching to a strategy of simpler innovation last year, Burger King Worldwide Inc. has reported its third-consecutive quarter of same-store sales growth in the United States. Focusing on fewer, bigger launches has helped the fast-food chain reduce operational complexity and improve profitability for its franchisees. Burger King launched five menu items during its most recent quarter but added only one new stock-keeping unit.
|Offerings such as the Chicken Big King sandwich strengthened the Burger King's position in the large sandwich category.
“We believe that these types of operationally simple products are the key to increasing franchisee margins,” said Daniel Schwartz, CEO, during an Aug. 1 call with analysts to discuss second-quarter earnings.
During the quarter, Burger King introduced the Chicken Big King, building on its position in fried chicken, which historically has been less of a focus for the burger chain. The sandwich, modeled after the Big King, features two crispy chicken patties topped with American cheese, lettuce, onions, pickles and a thousand island style dressing on a three-part sesame seed bun. Another new item, the Extra Long BBQ Cheeseburger, includes a pair of beef patties side by side on a hoagie bun.
“Both of these helped to drive traffic while solidifying our strength in the large sandwich category,” said Alex Macedo, president, Burger King North America. “Finally, we introduced the Bacon Cheeseburger Deluxe into our King Deals value menu, a value menu that we launched just last quarter, but is quickly becoming a guest favorite. Although these four sandwiches were introduced at different layers in our menu, they all deliver on the strategy — They are great tasting, operationally simple, and offer compelling value to our guests.”
Another strategic priority benefitting Burger King is accelerated unit development, with 131 new restaurants opened in the second quarter and 682 in the trailing 12-month period.
“This annual pace makes us one of the fastest growing QSRs in the world,” Schwartz said.
Remodels also represent a key initiative for Burger King, which is on track to reach its target of 40 percent reimaged restaurants in the US system by the end of 2015. The company said it continues to see good traction in its more than 2,200 remodeled restaurants to date.
For the second quarter ended June 30, net income increased 19 percent to $75.1 million, equal to 21 cents per share on the common stock, up from $62.9 million, or 18 cents per share, in the prior-year period.
Revenues for the quarter totaled $261.2 million, down 6.1 percent from $278.3 million the year before.
System-wide sales advanced 5.4 percent in constant currency, driven by comparable sales growth across all four regions and new unit growth.
“First of all, you know how tough the QSR industry has been the last several months, so we are actually very happy to be able to deliver three consecutive quarters not positive but ahead of the industry, which leads us to believe we are gaining market share,” Macedo said. “The other is that July actually turned out to be the best comp month of the year. We are actually comping a couple of points better than what we delivered in Q2. It makes us excited that we are going in the right direction. So our strategy will remain consistent, and looking forward we are pretty optimistic.”