Burger King's Profit Slides

• By Zacks Equity Research
• On 9:12 am EDT, Friday October 30, 2009

The sluggish economy and rising unemployment continues to hurt Burger King Holdings Inc. (NYSE: BKC - News) results. The company’s fiscal 2010 first quarter earnings of 34 cents a share missed the Zacks Consensus Estimate of 37 cents and fell 11% from 38 cents reported in the prior-year quarter. 

Burger King’s total revenue for the quarter, dipped 5% to $636.9 million, primarily due to unfavorable exchange rates and fall in comparable sales. Company restaurant revenue slid 6% to $469.1 million, franchise revenue fell 5% to $138.7 million, whereas property revenue declined 5% to $29.1 million. 

By geographic segments, revenue in U.S. & Canada dropped 3% to $432.1 million, EMEA/APAC down 8% to $179.1 million and Latin America fell 19% to $25.7 million.
 Burger King is facing the brunt of the turbulent economy as cash strapped consumers are dining at home or at restaurant chains offering discounts, which is adversely affecting the comparable-store sales. 

Comparable sales for the quarter slid 2.9% in the quarter after declining 2.4% in fourth-quarter 2009, revealing the impact of a deepening recession. In the year ago quarter, Burger King reported positive comps of 3.6%. By geographic segment, comps were: US & Canada down 4.6%, EMEA/APAC up 1% and Latin America down 4.6%. 

However, quick service restaurant operators like McDonald’s Corp. (NYSE: MCD - News), Yum! Brands Inc. (NYSE: YUM - News) and Chipotle Mexican Grill (NYSE: CMG - News) are faring better than casual dining restaurant chains like Cosi Inc. (NasdaqGM: COSI - News) and California Pizza Kitchen (NasdaqGS: CPKI - News) due to cheaper menu options. 

Total company restaurant margins expanded 40 basis points (bps) to 13%, driven by lower food, paper and product costs. Sequentially, restaurant margin improved 50 bps. Restaurant margins increased 180 bps to 13.9% at US & Canada, fell 300 bps to 9.9% at EMEA/APAC, and dropped 60 bps to 18.2% at Latin America. 

During the quarter, 58 net new restaurants were opened, of which nearly 80% were opened outside the US & Canada. Management expects to open 250 to 300 net new restaurants in fiscal year 2010.

BURGER KING HLDGS INC (BKC): Read the Full Research Report

MCDONALDS CORP (MCD): Read the Full Research Report

YUM BRANDS INC (YUM): Read the Full Research Report

CHIPOTLE MEXICAN GRILL INC (CMG): Read the Full Research Report

COSI INC (COSI): Read the Full Research Report

CALIFORNIA PIZZA KITCHEN INC (CPKI): Read the Full Research Report

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