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Burger King Profit Up 13 Percent as Revenue Rises

Thursday, 04 Feb 2010 10:20 AM

Burger King Corp.'s second-quarter profit rose 13 percent as its value menu, including items like a $1 double cheeseburger, lured cost-conscious eaters into its restaurants.

The company's franchisees fought against the double cheeseburger promotion when it was announced this fall, saying they would lose money on the deal. But the company said it spurred traffic and singled it out in a news release as helping the quarter's performance and said there would be more promotions to come.

Overall, though, the fast-food chain said Thursday that high unemployment continued to drag down performance around the world. The weak economy has people cutting back on their spending, which has hurt the restaurant industry.

So operators like Burger King and larger competitor McDonald's have been increasing their lower-priced offerings to keep people eating at their restaurants.

The nation's No. 2 hamburger chain said it earned $50.2 million, or 37 cents per share, during the three months that ended Dec. 31. A year earlier, the company earned $44.3 million, or 33 cents per share.

Revenue rose 2 percent to $645.4 million, which the company said was helped by the addition of 95 restaurants and an additional $22.8 million due to currency translation. A fluctuating U.S. dollar can help or hurt sales overseas when they are translated back to U.S. currency.

The results were better than Wall Street forecasts. Analysts expected Burger King to earn 34 cents per share on revenue of $634.8 million.

Shares rose 21 cents to $17.71 in early trading Thursday.

The company, based in Miami, said its second-quarter sales at restaurants open at least a year fell 2 percent, compared with a gain of 2.9 percent in the same quarter last year. The figure is a key measurement because it measures growth at existing establishments rather than including new ones.

In the U.S. and Canada, the figure fell 3.3 percent as the economy continued to hurt performance. Sales were also hurt in Germany and the Netherlands, but improved in Australia, Korea, Britain and Spain.

Burger King continued to market its value message to diners, including launching a six-month promotion for $1 double cheeseburgers in October. CEO John Chidsey said the company planned more promotions to keep luring in customers.

"We will continue to focus on our guests' desire for extreme affordability," he said in a news release.

It's unclear how that will sit with the company's franchisees, who sued Burger King in November over the $1 double cheeseburger. The National Franchise Association, a group that represents more than 80 percent of Burger King's U.S. franchise owners, said it faced at least a 10-cent loss on the deal and argued Burger King can't set maximum menu prices.

Messages left with the association were not immediately returned Thursday.

Baird analyst David Tarantino said the beat was due to the company's ability to increase its profit margins. He noted the company left its fiscal 2010 outlook intact but indicated softer sales at restaurants open at least a year, especially in the third quarter. The company has not issued guidance for the fiscal year.

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Burger King Corp.'s second-quarter profit rose 13 percent as its value menu, including items like a $1 double cheeseburger, lured cost-conscious eaters into its restaurants.The company's franchisees fought against the double cheeseburger promotion when it was announced this...
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2010-20-04
Thursday, 04 Feb 2010 10:20 AM
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