OKLAHOMA CITY Sonic Corp. said Tuesday it has fallen victim to the high levels of domestic unemployment and the deep discounting in the fast-food sector during its November-ended first quarter, forcing it to reduce expectations for the full year.
The parent company to the drive-in chain with more than 3,500 locations posted double-digit declines in both revenue and profit for its first quarter, and now expects earnings per share for its August-ending year to remain unchanged from 2009, or at about 72 cents per share. Prior guidance had called for 2010 per-share earnings to increase between 10 percent and 12 percent.
Sonic said its reduced guidance is based on expectations of a systemwide same-store sales decline of between 4 percent and 6 percent compared with prior expectations for flat sales.
“While conditions remain challenging for Sonic and the industry, we believe that, over time, product and service differentiation for value and premium offerings will help set Sonic apart from the majority of the quick-service industry,” said Clifford Hudson, chairman and chief executive officer.
For its quarter ended Nov. 30, Sonic posted a 13-percent decline in net income to $6.2 million, or 10 cents per share, from $7.1 million, or 12 cents per share, in the same quarter last year.
Latest-quarter revenue fell 26 percent to $136.5 million, which reflected both the sale of 205 corporate restaurants during 2009 and negative same-store sales. Systemwide same-store sales fell 6.5 percent and reflected drops of 6 percent at franchised locations and 9.1 percent at drive-ins in which Sonic holds a majority ownership.
“The significant level of unemployment and its impact on consumer spending, combined with increased competition for value menu offerings, have negatively affected sales for the industry and for the Sonic system,” Hudson said.
Contact Sarah Lockyer at [email protected].