Sonic banks on value offers in 1Q

Sonic banks on value offers in 1Q

CEO credits ‘sharper’ messaging as same-store sales decline 1.7%

Sonic Corp. sharpened its value promotions in the first quarter to help counter “intense competitive pressure,” the company CEO said Thursday.

"As expected, our first quarter same-store sales declined modestly versus prior year reflecting continued intense competitive pressure and unfavorable weather," said Cliff Hudson, Sonic CEO, in a statement.

For the first quarter ended Nov. 30, Sonic reported net income fell 12.9 percent, to $11.4 million from $13.1 million in the same period last year, but earnings per share rose to 29 cents from 28 cents in the prior year. Revenue in the quarter fell 18.6 percent, to $105.4 million from $129.6 million a year ago.

Sonic stock was up more than 3 percent in after-hours trading Thursday. Analysts had expected earnings of 27 cents a share, according to the website EarningsWhispers.com.

Systemwide same-store sales declined 1.7 percent in the quarter, including a 1.6 percent decline at franchised drive-ins and a 3.2 percent drop at company-owned restaurants.

“Excluding the impact of weather, same-store sales were flat, indicating an improvement in underlying traffic trends,” Hudson said.

He said Sonic in the quarter promoted the Carhop Classic for $2.99, featuring a full-sized cheeseburger and medium onion rings.

Hudson said the Carhop Classic was “a value offering with a highly compelling price point, broad consumer appeal and strong quality differentiation.”

Hudson added that “the introduction of a sharper everyday value message also improved value and quality scores from customers, validating our evolution to more focused and consistent national value promotions.” The promotions helped Sonic maintain traffic, he said.

“We will continue to refine this strategy as we move through the remainder of the fiscal year, seeking to balance everyday value and consistent profitability for franchisees while staying true to Sonic's core tenets of quality, differentiation and innovation,” Hudson said.

"While price competition remains fierce, we are hard at work driving the business in areas we can control,” he noted. “We continue to refine our current media strategies, resulting in increased impressions on national cable today and new creative content in the market this spring. We have growing confidence in our product pipeline as we look out to the key summer season and our mobile order-ahead pilot is underway.”

Also on Thursday, Sonic said it was highlighting its Fruit Fizz beverage, a sparkling water-based drink with zero to 60 calories per serving. Starting at 99 cents during the morning hours, the Fruit Fizz was being offered in such flavors as Strawberry Peach, Mango Lime and Raspberry Lemon.

Scott Uehlein, Sonic vice president of product innovation and development, said the Fruit Fizz capitalized on a growing market for sparkling water beverages.

Sonic has 3,500 drive-ins nationwide.

Contact Ron Ruggless at [email protected] 

Follow him on Twitter: @RonRuggless

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