Boom Box Sonic's new value bundle
June 24, 2016
by Monica Watrous
Sonic recently launched the Boom Box value meal for $5.
OKLAHOMA CITY — Challenged by a slowdown in traffic at its drive-in restaurants, Sonic Corp. hopes its new bundled value offering will lure back more consumers. Its new Sonic Boom Box features a beef hot dog and a junior cheeseburger with a side order and drink for $5.
|Cliff Hudson, CEO of Sonic
“It is a shift away from what we would ordinarily have, more drinks- and ice cream-heavy calendar,” said Cliff Hudson, CEO of Sonic, during a June 23 earnings call with financial analysts. “As a matter of fact, we had started that into the spring, and the wet and cool weather doesn’t play as well with drinks and ice cream. So the Boom Box here is more clearly value-based, less differentiated than we might ordinarily be promoting, but we felt in that April-to-May timeframe, and we feel today, that it is a strong tactical response to a good deal more sluggish environment, and we’re going to continue to assess that environment as the summer goes along and affect our promotions accordingly, summer into fall.”
Net income in the third quarter ended May 31 was $15,353,000, equal to 32 cents per share on the common stock, down from $20,442,000, or 39 cents per share, in the prior-year period. Revenues increased to $165,239,000 from $164,748,000. Same-store sales increased 2 percent versus 6.1 percent in the third quarter of the prior year.
Sonic’s fast-food competitors have rolled out aggressive bundled value offerings in recent months, Hudson said. Since the beginning of the year, McDonald’s introduced its McPick 2 platform, Wendy’s announced a 4 for $4 deal, and Burger King launched a 5 for $4 deal.
“The intent of the Boom Box is to, of course, defend short-term traffic challenges while we continue to assess what’s going on in this broader environment,” Hudson said. “As we speak, we’re in the process of amplifying the media around this promotion in ways that we believe will be very positive and likely to continue that through a good part of the summer, certainly July and even August. And while June results have stabilized versus May, we’re not where we want to be and this is reflected in lower projection for full year same-store sales of a 2 percent to 4 percent versus what we might have indicated in March.
“We do expect our fourth-quarter comps this summer quarter into August to be positive… As we look ahead to the fall, we anticipate executing against a promotional calendar focused on food innovation and strong targeted value, but we are going to continue to watch this broader environment and we will adjust our course as permitted or as needed.”