Restaurants shift blame to weather for sinking sales

Restaurants shift blame to weather for sinking sales

NEW YORK As the latest same-store sales reports come in, the effects of the severe winter weather that hit most of the country in January and February are becoming clear, and in some cases it isn’t pretty.

Some analysts have begun to question, however, whether the talk of weather is only an excuse for a vacuum of sales-driving initiatives at brands that are already suffering.

Sonic, Burger King, and CKE Restaurants’ Hardee’s and Carl’s Jr. each cited the snow storms and cold weather of early 2010 as catalysts for the further erosion of sales, while other chains, including Ruby Tuesday [3] and McDonald’s [4], kept weather mostly out of their reporting of more positive trends.

Sonic Corp., the parent to more than 3,500 drive-in restaurants, said Wednesday that systemwide same-store sales fell between 12 percent and 14 percent during its fiscal second quarter, which ended Feb. 28. Same-store sales at corporate locations fell 15 percent. The results were well below what had been expected, and forced the company to reduce its earnings guidance for the full year.

The Oklahoma City-based company said nearly two-thirds of the second-quarter same-store sales decline can be attributed to the weather, as record snowfall and cold temperatures hit the country, including in Texas and Oklahoma, where more than a third of Sonic’s restaurants are located.

Still, Sonic has now posted sixth consecutive quarters of negative systemwide same-store sales trends.

“While weather understandably had a greater than average impact on Sonic’s second-quarter results É underlying trends remain worrisome,” John Glass, a securities analyst at Morgan Stanley, said in a research report. He said the issues confronting Sonic may be more than just weather- or economy-related.

At Burger King Holdings Inc., the company’s use of winter weather to explain asame-store sales decline [5] in the first two months of 2010 was met with criticism as well. Miami-based Burger King said same-store sales in the United States and Canada fell 8.2 percent for the two-month period ended Feb. 28, compared to an increase of 3.1 percent in the same period last year.

The company said winter weather accounted for about 3 points in the decline. John Ivankoe, an analyst at J.P. Morgan, said the results, even when adjusted for weather, still put Burger King behind its peers.

The results “put the brand close to its struggling domestic peers (Jack in the Box ... and Sonic ... ) and well behind better performing national players Wendy’s and McDonald’s,” he said.

Many analysts noted that the contentious $1 double cheeseburger has hurt Burger King, which will raise that price to $1.19 in April. The chain also has started to highlight its premium offerings, including the new Steakhouse XT and bone-in ribs set to debut in May.

Sonic also will change strategies, with plans to drive same-store sales to a level between negative 5 percent and flat in the second half of the year. New television ads showcase the Sonic experience, including its food quality and skating carhops. The chain also will tweak its value positioning, including the pairing of a full-priced sandwich with a free side dish.

“We believe focusing on its differentiated experience, rather than the previous strategy of competing with many of its larger competitors by focusing on discounted price points, will prove much more beneficial for Sonic in the coming quarters,” said Brad Ludington, an analyst at KeyBank Capital Markets.

Contact Sarah E. Lockyer at [email protected] [6].