Sales heat up at Sonic

by Monica Watrous
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New menu items such as toaster breakfast sandwiches drove sales and customer traffic during Sonic's recent quarter.

OKLAHOMA CITY — Sonic may be eating McDonald’s lunch. The drive-in chain reported higher traffic and sales in the recent quarter, driven by a mix of menu innovation and national product promotion, as well as lost business from its fast-food competitor.

“Frankly, in the last number of months in this past year the weakness of McDonald’s, just given their scale, if they are going to lose traffic, all of us have a huge upside,” said Cliff Hudson, CEO of Sonic Corp., during a Jan. 6 conference call with financial analysts to discuss first-quarter performance. “In our markets, we would appear to have captured a good part of that. I don’t mean a good part of theirs, but a good part of ours is picking up new customers.”

Same-store sales for the first quarter climbed 8.5 percent, reflecting strong growth across day parts as Sonic introduced a variety of items that included boneless chicken wings and waffle cone sundaes.

“There are key categories like chicken and ice cream that have done particularly well,” Hudson said. “But the variety of products that are doing well and the product lines that are doing well really have increased customer frequency across all day parts. So, we’re getting good same-store sales across all day parts, not just check, but also traffic.”

Lil’ Doggies and Lil’ Chickies

 
New menu items include Lil’ Doggies and Lil’ Chickies, which are snack-size hot dogs and chicken sandwiches, and French Toaster breakfast sandwiches.

“I can tell you at this point our product pipeline is as strong as ever,” Hudson said. “And we’re really in a good position because of that to grow not just product lines but also day parts those product lines support. And we see a very good product pipeline for several years to come, good creativity and good embrace of those by our operators.”

For the first quarter ended Nov. 30, 2014, Sonic earned $10,085,000, equal to 19 cents per share on the common stock, up 23 percent from $8,208,000, or 15 cents per share, in the prior-year period. Revenues totaled $139,856,000, a 10 percent increase over $126,652,000 in the comparable quarter.

Looking ahead, the chain expects to drive earnings per share growth at the high end or above 14 percent to 20 percent in the fiscal year.

“With initiatives that we have in place now and the more traditional aspect of the business, but also the technology initiatives that we’re implementing, really gives us the confidence that we’ll continue to grow same-store sales, the linchpin in driving all of this… over the next several years,” Hudson said.

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