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Burger King 4Q profit drops on slow sales

High unemployment and a skittish global economy continue to dog Burger King Holdings Inc., which reported Tuesday a 16.8-percent decline in profit for the fourth quarter.

Burger King's net income for the June 30-ended quarter totaled $49.0 million, or 36 cents per share, compared with $58.9 million, or 43 cents per share, in the same period last year. Revenue declined 1.1 percent, to $623.0 million from $629.9 million.

Fourth-quarter same-store sales improved, but were still negative, with the nation’s No. 2 burger chain reporting a decline of 1.5 percent in the United States and Canada, compared with a 4.5-percent drop in the year-ago period.

Global same-store sales fell 0.7 percent, compared with a 2.4-percent drop in the year-ago quarter.

“In fiscal year 2010, we faced sustained levels of high unemployment and a fragile global economy that combined made this one of the toughest operating environments in recent history,” John Chidsey, Miami-based Burger King’s chairman and chief executive, said in a statement.

U.S. sales in the fourth quarter were helped by what the company said was “a sequential quarterly improvement in traffic and average check from the fiscal 2010 third quarter,” which it said was aided by its fire-grilled bone-in ribs promotion in May.

Burger King said worldwide restaurant margins were 10.7 percent in the fourth quarter and 12.2 percent for the full fiscal year, impacted by higher food, paper and product costs primarily driven by increased U.S. beef prices.

For the full fiscal year, Burger King's net income fell 6.6 percent to $186.8 million, or $1.36 per share, from $200.1 million, or $1.46 in 2009. Revenue for the year fell 1.4 percent, to $2.50 billion from $2.53 billion last year.

Same-store sales for the entire year were down 2.3 percent worldwide, compared with an increase of 1.2 percent in 2009. In the United States and Canada, same-store sales fell 3.9 percent, compared with a 0.4-percent bump last year.

Burger King’s net restaurant count increased 249 over last year, which was a net restaurant growth rate of 2.1 percent. The company said more than 90 percent of that growth was outside the United States and Canada. Burger King said its sales in the Asia Pacific and South American markets were strong.

Chidsey said new menu items in the year ahead will include “affordable as well as premium offerings” as well as an expanded breakfast program.

“We are also laser-focused on the U.S. and Canada fall launch of our enhanced breakfast platform that will include several new breakfast products and will feature Seattle’s Best Coffee,” he said.

“As we enter fiscal 2011,” he said, “we anticipate that the challenging consumer environment will continue due to high unemployment and underemployment levels and weak consumer confidence.”

Burger King operates or franchises more than 12,000 restaurants in the United States and 76 nations and territories.

Contact Ron Ruggless at [email protected].

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