SYRACUSE N.Y. Carrols Restaurant Group Inc., a 317-unit Burger King franchisee and the parent of 89 Pollo Tropical and 153 Taco Cabana restaurants, reported Tuesday a 24-percent drop in third-quarter profit because of increased costs at its BK division and slowed sales from hurricane-related closures at in-house brands.
The company’s results, however, beat analyst expectations and its reiteration of plans to slow restaurant development, close sale-leaseback deals, lower capital expenditures, and pay down debt helped the stock rise as much as 10 percent during trading on Tuesday. It closed up 5.2 percent, at $2.04 per share.
“We are confident that these actions to reduce debt, combined with our ability to significantly reduce our lease financing obligations, ensure that we will maintain an acceptable margin of safety with respect to the financial covenants in our loans,” chief executive Alan Vituli said in a statement.
Carrols, which holds about $300 million in debt, has been dogged by concerns surrounding bank covenants in the face of its reduced profit and slowed sales. In addition to cash-saving initiatives, two securities analyst said Carrols would consider selling its Burger King locations if the right price was attained.
For the quarter ended Sept. 28, Carrols' net income totaled $3.7 million, or 17 cents per share, compared with year-ago earnings of $4.9 million, or 23 cents a share.
Revenues for the latest quarter increased 2.7 percent to $209.1 million, which reflected same-store sales dips of 0.9 percent at Taco Cabana and 1.9 percent at Pollo Tropical. Quarterly same-store sales at Burger King rose 3.5 percent.
The company said sales were hurt at Taco Cabana because of the loss of 150 operating days during Hurricane Ike and at Pollo Tropical because of the distressed economy in Florida.
Third quarter total costs and expenses rose nearly 4 percent, which analysts said was mainly because of a 24.7-percent year-to-year increase in ground beef costs for Burger King restaurants.
For the first nine months of this year, net income totaled $8.4 million, versus $11.5 million a year ago. Revenues for the latest nine months increased 3.9 percent to $615.5 million.