MIAMI Burger King Holdings Inc. posted a 2-percent increase in first quarter profit, a lower-than-expected outcome, as increased costs minimized a 12-percent revenue surge from restaurant openings, late-night hours and new products like the Fresh Apple Fries.
For the quarter ended Sept. 30, Burger King earned $50 million, or 36 cents per share, compared with year-earlier earnings of $49 million, or 35 cents per share.
Wall Street analysts had, on average, expected the No. 2 burger chain to post per-share earnings of 39 cents per share, according to Thomson Financial. Burger King said that excluding expenses from the company’s acquisition of 72 franchised restaurants, latest-quarter per-share earnings would have totaled 38 cents.
In addition, Burger King said “restaurant margins were significantly pressured by record high commodity costs, expenses related to [the company’s] U.S. and Canada reimaging program and acquisition start-up costs,” from the purchased franchised locations. The company’s total costs and operating expenses rose 15 percent from a year ago to $584 million.
Revenues rose 12 percent to $674 million, which reflected a worldwide same-store sales increase of 3.6 percent. Same-store sales in the United States and Canada increased 3.0 percent. During the quarter Burger King opened, on a net basis, 67 restaurants, which marked the highest level of restaurant openings during the first quarter in seven years, the company said.
The chain’s top-line growth was driven by “strategic pricing,” which it did not detail, and a focus on both value product offerings and higher priced, “indulgent” items, a dual menu focus that Burger King calls its barbell strategy. Results in the United States were also boosted by the brand’s new kids meal offerings that include Apple Fries and macaroni and cheese.
The company, parent to a system of more than 11,600 corporate or franchised restaurants, reiterated its full-year outlook for fiscal 2009, which included per-share earnings growth of between 12 percent and 15 percent, positive same-store sales growth and continued restaurant development. Burger King said it would soon announce an interactive gaming promotion, tie-ins with iDog and The Simpsons, and will continue its marketing focus on the breakfast and late-night dayparts. The company also said it expected moderating food and energy costs.