Burger King Reports Positive Same-Store Sales, Expansion (Press Release)
Burger King Holdings, Inc. reports first quarter fiscal 2009 results: Positive comparable-store sales and net restaurant expansion drive revenue performance.
-- Chain Leader, 10/31/2008 9:27:00 AM
MIAMI--(BUSINESS WIRE)--Burger King Holdings, Inc. (NYSE:BKC):
Highlights:
Revenues up 12 percent to $674 million
19th consecutive quarter of worldwide positive comparable sales; 3.6 percent
18th consecutive quarter of United States and Canada positive comparable sales; 3.0 percent
Trailing 12-month (TTM) average restaurant sales (ARS) up 8 percent, to $1.32 million - a new record high
TTM net restaurant count increases by 342 - on target to meet annual guidance
EPS and adjusted EPS results as outlined below:
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Three Months Ended |
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September 30, |
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|
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2008 |
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2007 |
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% change |
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EPS |
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$ 0.36 |
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$ 0.35 |
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3% |
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Adjustments1 |
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$ 0.02 |
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$ - |
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NM |
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Adjusted EPS |
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$ 0.38 |
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$ 0.35 |
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9% |
Burger King Holdings, Inc. delivered robust revenue growth led by an increased number of company restaurants, positive worldwide comparable sales in all segments and significant worldwide net restaurant expansion.
Comparable sales were up 3.6 percent, marking the 19th consecutive quarter of worldwide same-store-sales growth. In the United States and Canada, comparable sales were up 3.0 percent, the 18th consecutive quarter of same-store-sales growth. Additionally, the system opened 67 net new restaurants, the highest number of first quarter net restaurant openings in seven years.
As a result, the company posted strong revenues for the first quarter of $674 million, up 12 percent from $602 million in the same quarter last year.
"The global strength of our business is evidenced by our solid top-line expansion," said John Chidsey, chairman and chief executive officer. "We delivered strong revenues even with mounting economic and consumer uncertainties by successfully executing on our multiple growth strategies, including net restaurant growth, product innovation, marketing leadership, longer competitive hours and operational excellence."
Comparable sales worldwide were fueled primarily by the implementation of strategic pricing as well as a strong mix of high demand indulgent and value product offerings and promotional tie-ins. Results were also aided by regionally based offerings such as the successful introduction of an innovative and healthy kids meal, which includes BKTM Fresh Apple Fries and nutritionally fortified Kraft(r) Macaroni and Cheese in the U.S. and Whopper(r) sandwich limited time offers in both Europe and Latin America. Also contributing to sales were family promotions used throughout many markets including PokemonTM, CrayolaTM and Neopets(r).
"We significantly expanded our revenue as we leveraged our global footprint and broad-based consumer appeal. Our guests continue to seek our affordable pricing, elevated quality and convenience. We believe our brand is positioned to perform well in spite of the current economic slowdown as proven by our track record of continued sales increases," Chidsey added.
Worldwide trailing 12-month ARS reached a record high - posting an 8 percent increase to $1.32 million compared to $1.22 million in the same period last year. Worldwide first quarter fiscal 2009 ARS increased 5 percent to $343,000 compared to $327,000 in the same quarter last year.
"We are very pleased with our top-line performance; however, we recognize company restaurant margins were significantly pressured by record high commodity costs, expenses related to our U.S. and Canada reimaging program and acquisition start-up costs," Chidsey said.
The company's earnings were also impacted by an incremental $9 million of expenses recorded in Other Income and Expense as compared to the same period last year. Five million (equaling $0.02 of EPS) of the increase consisted of primarily non-cash expenses resulting from volatility in foreign currencies and interest rate markets.
Chidsey continued: "Going forward, we expect earnings will benefit from already moderating food and energy costs, expected sales lifts from the newly reimaged company restaurants and the elimination of acquisition expenses."
For the quarter, the company reported earnings per share of $0.36 compared to $0.35 in the same quarter last year. Adjusted earnings per share, excluding $3 million of adjustments, increased 9% percent to $0.38 compared to $0.35 in the year ago period. These adjustments consisted of expenses related to the previously announced acquisition of 72 franchise restaurants, specifically settlement charges and start-up costs.
Development
In the first quarter, the company increased its worldwide net restaurant count by 67, led by its international markets in Europe and the Middle East. During the last 12 months, the company opened a total of 342 net new restaurants.
"The momentum of our global development pipeline is confirmed by our solid quarterly and trailing 12-month net restaurant growth," Chidsey said. "Given our strong development activity and our first quarter net restaurant growth, we expect to achieve our planned 350 to 400 net new restaurants in fiscal 2009 as we expand our brand in North America and around the world."
Uses of Cash
During the first quarter, the company generated $52 million of cash flow from operations, which was used for key strategic purposes targeted at enhancing shareholder value. The company declared and paid a cash dividend totaling $8 million and opportunistically repurchased $18 million of its shares. The company also invested $4 million on its U.S. and Canada reimaging program which is expected to generate attractive returns.
"Even amidst the current economic slowdown, our ability to generate solid cash flow is a fundamental benefit of our highly franchised business model," said Ben Wells, chief financial officer. "And our strong balance sheet uniquely positions us to invest in the brand, driving future growth."
Future growth
The product and promotional calendar for the second quarter is structured to continue the company's multi-year positive comparable sales trend. Scheduled marketing initiatives include a soon-to-be announced interactive gaming promotion. Other campaigns slated to increase SuperFamily sales include iDogTM and The SimpsonsTM. In addition, the company will strategically focus on expanding the breakfast and late-night dayparts with competitive hours advertising and will continue to build upon its successful barbell menu strategy.
Chidsey concluded: "Our business fundamentals remain strong and we believe that our brand is well positioned to drive future profitability as we continue to execute on our proven strategies: expanding our global footprint; accelerating our company restaurant reimaging program; providing our guests with an exceptional dining experience; and maintaining our industry-leading marketing. Our strategies remain on course; therefore, we are reaffirming our full-year EPS forecast of $1.54 to $1.59 for 12 to 15 percent EPS growth based on our outlook for continued positive comparable sales, significant restaurant development and increased income from operations."
About Burger King Holdings, Inc.
The BURGER KING(r) system operates more than 11,600 restaurants in all 50 states and in 73 countries and U.S. territories worldwide. Approximately 90 percent of BURGER KING(r) restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. In 2008, Fortune magazine ranked Burger King Corp. among America's 1,000 largest corporations. To learn more about Burger King Corp., please visit the company's Web site at www.bk.com.
Related Communication
Burger King Holdings Inc. (NYSE:BKC) will hold its first quarter earnings call for fiscal year 2009 on Friday, Oct. 31, at 10 a.m. (Eastern time) following the release of its first quarter results before the stock market opens on the same day. During the call, Chairman and Chief Executive Officer John Chidsey, Chief Financial Officer Ben Wells, President, Global Marketing, Strategy, and Innovation Russ Klein and Senior Vice President of Investor Relations and Global Communications Amy Wagner will discuss the company's first quarter results.
This call is being Web cast and may be accessed via the company's Web site at www.bk.com through the Investor Relations link.
U.S. participants may also access the earnings call by dialing (888) 679-8035; participants outside the United States may access the call by dialing (617) 213-4848. The participant passcode is 29706352. The call will be available for replay under the company's Web site at www.bk.com through the Investor Relations link for a period of 30 days.
Participants may also pre-register for the conference call at https://www.theconferencingservice.com/prereg/key.process?key=P4GA4MN7 9 (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists).
FORWARD-LOOKING STATEMENTS
Certain statements made in this report that reflect management's expectations regarding future events and economic performance are forward-looking in nature and, accordingly, are subject to risks and uncertainties. These forward-looking statements include statements regarding our expectations regarding the strength and momentum of our worldwide business: our expectations regarding worldwide net restaurant growth, our global development pipeline and our ability to execute on our development strategy; our beliefs regarding our guests' expectations; our expectations regarding the ability of the Burger King(r) brand to perform well and generate continued sales increases and solid cash flow in spite of the current economic slowdown; our expectations that our earnings will benefit from moderating food and energy costs, expected sales lifts from newly reimaged Company restaurants and the elimination of acquisition expenses; our expectations regarding our ability to use our balance sheet to drive future growth; our expectations regarding the success of our promotional calendar for the second quarter of fiscal 2009; our expectations regarding the ability of our reimaging program to increase sales and generate attractive returns; our ability to continue to capture a larger market of the breakfast and late night dayparts and continue to build upon our barbell menu strategy; our beliefs and expectations regarding fiscal 2009; our ability to execute on our strategic initiatives to drive future profitability and deliver our earnings per share guidance and net new restaurant forecast for fiscal 2009; and other expectations regarding our future financial and operational results. These forward-looking statements are only predictions based on our current expectations and projections about future events. Important factors could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements.
These factors include those risk factors set forth in filings with the Securities and Exchange Commission, including our annual and quarterly reports, and the following:
Our ability to compete domestically and internationally in an intensely competitive industry;
Our ability to successfully implement our international growth strategy;
Our ability to manage increases in our operating costs, including costs of food and paper products, rent expense, energy costs and labor costs, which can adversely affect our operating margins and financial results, particularly in an environment of declining sales or challenging macroeconomic conditions, if we choose not to pass, or cannot pass, these increased costs to our guests;
Risks related to our international operations;
Economic or other business conditions that may affect the desire or ability of our customers to purchase our products such as inflationary pressures, higher unemployment rates, increases in gas prices, declines in median income growth, consumer confidence and consumer discretionary spending and changes in consumer preferences;
Our continued good relationship with, and the success of, our franchisees;
The ability of our franchisees to obtain financing for new development, restaurant remodels and equipment initiatives on acceptable terms or at all given the current turmoil in the global credit markets;
Our continued ability, and the ability of our franchisees, to obtain suitable locations for new restaurant development;
The effectiveness of our marketing and advertising programs and franchisee support of these programs;
Risks related to franchisee financial distress which could result in, among other things, restaurant closures, delayed or reduced payments to us of royalties and rents and increased exposure to third parties, such as landlords;
Risks related to the renewal of franchise agreements by our franchisees;
The ability of franchisees who are experiencing losses from their other businesses to continue to make payments to us and invest in our brand;
Risks related to food safety, including foodborne illness and food tampering;
Risks related to the loss of any of our major distributors, particularly in those international markets where we have a single distributor, and interruptions in the supply of necessary products to us;
Our ability to execute on our reimaging program in the U.S. and Canada to increase sales and profitability, and the short term impact of our reimaging program on revenues and operating margins due to temporary restaurant closures and accelerated depreciation of assets;
Our ability to identify and consummate successfully acquisition and development opportunities in new and existing markets;
Our ability to refinance or modify our bank debt or obtain additional financing to fund our future cash needs given the current lending environment;
Risks related to the impact of the global financial and credit crisis on the restaurant industry in general and on our business and results of operations;
Risks related to the ability of counterparties to our secured credit facility, interest rate swaps and foreign currency forward contracts to fulfill their commitments and/or obligations due to disruptions in the global credit markets, including the bankruptcy or restructuring of certain financial institutions;
Fluctuations in currency exchange and interest rates, and their impact on both pretax income and the income tax provision, and our ability to successfully manage the impact of volatility in foreign currencies and interest rate markets;
Risks related to interruptions or security breaches of our computer systems and risks related to the lack of integration of our worldwide technology systems;
Our ability to continue to extend our hours of operations, at least in the U.S. and Canada, to capture a larger market of both the breakfast and late night dayparts;
Changes in consumer perceptions of dietary health and food safety and negative publicity relating to our products;
Our ability to retain or replace executive officers and key members of management with qualified personnel;
Our ability to utilize foreign tax credits to offset our U.S. income taxes due to continuing losses in the U.K. and other factors and risks related to the impact of changes in statutory tax rates in foreign jurisdictions on our deferred taxes and effective tax rate;
Our ability to realize our expected tax benefits from the realignment of our European and Asian businesses;
Changes in demographic patterns of current restaurant locations;
Our ability to adequately protect our intellectual property;
Risks related to market conditions, including the market price and trading volume of our common stock, that would affect the volume of purchases, if any, made under our Share Repurchase Program;
Our ability to manage changing labor conditions and difficulties in staffing our international operations;
Risks related to disruptions and catastrophic events, including disruption in the financial markets, war, terrorism and other international conflicts, public health issues and natural disasters;
Adverse legal judgments, settlements or pressure tactics; and
Adverse legislation or regulation.
These risks are not exhaustive and may not include factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We do not undertake any responsibility to update any of these forward-looking statements to conform our prior statements to actual results or revised expectations.
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