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Burger King's 2Q profit grows

MIAMI Burger King Holdings Inc. said Thursday it expects to offer more value promotions like its controversial $1 double cheeseburger as it reported a 13.3-percent jump in second-quarter profit.

While Burger King franchisees have sued over the six-month $1 double cheeseburger offer, saying they were losing money on the promotion, the company said it helped drive traffic to its stores.

“The QSR industry is expected to face strong macroeconomic headwinds throughout 2010, as unemployment conditions are not likely to improve,” said John W. Chidsey, Burger King’s chairman and chief executive. “Therefore, we will continue to focus on our guests’ desire for extreme affordability with promotions such as the $1 quarter-pound double cheeseburger and other value promotions we will be introducing in the near-term.”

For the quarter ended Dec. 31, Burger King's net income rose to $50.2 million, or 37 cents a share, from $44.3 million, or 33 cents a share, in the same period last year. Latest-quarter revenue rose 1.8 percent, to $645.4 million on the strength of new restaurant openings and favorable currency translations, Burger King said.

However, the nation's No. 2 burger brand continued to feel the effects of a weak economy in its stores. Global same-store sales declined 2 percent in the second quarter, compared with an increase of 2.9 percent in the same period last year. In the United States and Canada, second-quarter same-store sales fell 3.3 percent. Other nations seeing same-store sales dips were Germany and the Netherlands, but improvements were seen in Australia, Britain, Korea and Spain.

“The industry and our brand continued to experience weak consumer spending as global unemployment levels remained high,” Chidsey said.

In addition to more value promotions, Chidsey said Burger King would look to build sales with new premium products, like the Steakhouse XT burger, which launches nationally this month. The introduction of the bigger burger comes as a result of Burger King's new batch broiler system, which the chain said has been implemented across its U.S. system.

Chidsey said Burger King also has invested in a new point-of-sale system, which will help the chain manage orders and inventory and control costs. Dow Jones reported earlier this week that Burger King has filed several lawsuits against franchisees that have not yet installed the new POS systems.

Burger King said it increased its net restaurant count by 95 stores in the second quarter, with international development accounting for most of that increase.

Burger King has more than 12,000 restaurants in 74 nations. About 90 percent of the restaurants are franchised.

Contact Ron Ruggless at [email protected].

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