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Burger King Earnings Soar as Expenses Fall

Burger King’s first-quarter earnings more than doubled even though revenue fell, as the fast-food chain trimmed several restaurant-related expenses.

The Miami-based company had warned earlier this month that sales at established restaurants were expected to fall during the quarter, and they wound up declining 1.4 percent. That includes a 3 percent drop in the United States and Canada.

Burger King said competition and a strong first quarter last year hurt U.S. and Canadian sales comparisons to this year’s quarter. But it said sales from those countries rallied in March due in part to promotions like the $1.29 Whopper Jr.

The company has been adjusting its strategy to focus on more menu deals like that. McDonald’s has been particularly aggressive in touting its Dollar Menu to boost traffic at a time when the restaurant industry is barely growing. Wendy’s also revamped its value menu recently.

Overall, Burger King Worldwide Inc. said Friday its net income rose to $35.8 million, or 10 cents per share, in the quarter that ended March 31. That’s up from $14.3 million, or 4 cents per share, in the previous year’s quarter when it was still private.

The company previously said adjusted earnings, which don’t count certain one-time expenses, totaled 17 cents per share in the most recent quarter.

Revenue fell about 42 percent to $327.7 million. Analysts expected $305.8 million, according to FactSet.

Total restaurant expenses, which include things like food costs and payroll expenses, fell nearly 70 percent in the quarter to $108.1 million.

Burger King has been undergoing a revamp since it was purchased and taken private in 2010 by 3G Capital, a private investment firm run by Brazilian billionaires. The company has been selling more restaurants to franchisees, a move that lowers overhead costs. Instead of booking sales from those restaurants, that means Burger King would collect franchise fees instead.

In the first quarter, the company’s restaurant revenues tumbled 69 percent to $121.1 million, but its franchise and property revenues rose 19 percent to $206.6 million. The company sold 33 company-owned restaurants in the U.S. and Canada to franchisees during the quarter for $9.3 million.

Burger King said about 97 percent of its restaurants are owned and operated by independent franchisees.

The company’s selling, general and administrative expenses also fell about 30 percent to $66.7 million in the quarter.

3G Capital also has slashed costs, signed international expansion deals and changed the U.S. menu to appeal to a wider audience. The moves came ahead of the company’s return to public trading on the New York Stock Exchange last June.

Burger King says its efforts to revamp the brand remain on track. But CEO Bernardo Hees, a 3G partner, is moving on later this year to head Heinz, another 3G investment. Chief Financial Officer Daniel Schwartz, also a 3G partner, will succeed Lees as CEO at Burger King.

Burger King shares rose 21 cents, or 1.2 percent, to close at $18.27 Friday. They have traded between $12.91 and $20.20 since relisting.

Article source: http://www.nytimes.com/aponline/2013/04/26/business/ap-us-earns-burger-king.html?partner=rss&emc=rss

McDonald’s Profit Rises, but Year-Over-Year Sales Fall

In announcing its results, the company said that comparable sales worldwide fell 1 percent during the period and warned that comparable sales were expected to dip again in April. It was the first quarterly decline in a decade in sales at restaurants open at least 13 months.

As Burger King and Wendy’s have stepped up their marketing, McDonald’s has responded by promoting its Dollar Menu and other value deals.

The strategy has caused concern among analysts who worry that it could affect profit margins. It has also rankled some McDonald’s franchisees.

But in a conference call with analysts on Friday, McDonald’s executives insisted that offering cheaper prices was necessary because the restaurant industry was barely growing. The executives said McDonald’s needed to steal customers from its rivals.

“That battle for market share has become so critical for the long-term health of business, we’re willing to sacrifice that margin,” said Peter J. Bensen, the company’s chief financial officer.

Although profit margins declined in the first quarter, McDonald’s noted that it picked up market share in many parts of the world, including the United States. But there are signs that such deals are upsetting the independent franchisees.

Janney Capital Markets reported this week that 25 United States franchisees who collectively operate 180 McDonald’s restaurants on average rated their relations with the company below historical levels. Janney said some complained about excessive coupons and discounts.

For the quarter, global sales dropped 1.2 percent in the United States and 1.1 percent in Europe, the company’s biggest region by sales. Sales fell 3.3 percent in the region encompassing Asia, the Middle East and Africa, reflecting weakness in Japan and in China.

For the quarter, McDonald’s earned $1.27 billion, or $1.26 a share, compared with $1.267 billion, or $1.23, a year ago. Revenue edged up 1 percent, to $6.6 billion.

Analysts had expected a profit of $1.26 a share on revenue of $6.59 billion, according to FactSet.

Shares of McDonald’s fell 2 percent, to $99.92.

Article source: http://www.nytimes.com/2013/04/20/business/mcdonalds-profit-rises-but-year-over-year-sales-fall.html?partner=rss&emc=rss

Burger King Earnings Soar as Expenses Fall

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