Sonic 4Q results dampened by Hurricane Harvey, traffic slowdown

Weather and ‘softer’ movie promotions dented drive-in sales

Hurricane Harvey in Texas and “softer” summer promotional traffic impacted fiscal fourth-quarter sales and net income at Sonic Corp., the company reported late Monday. 

The Oklahoma City-based drive-in operator said systemwide same-store sales were down 3.3 percent in the quarter ended Aug. 31, including a 3.2 percent decline at franchised restaurant and a 4.8 percent decline at company-owned units. 

"Our weaker-than-expected same-store sales performance reflects the intense competitive environment and unfavorable weather we saw during the quarter, including the devastation caused by Hurricane Harvey," said Cliff Hudson, Sonic’s CEO, in a statement. 

In the last half of August, Hurricane Harvey parked over Houston and its surrounding area for days, causing historic flooding and closing many businesses in the large Sonic market.

In addition, Sonic’s tie-in with the “Transformers: The Last Night” movie was less effective than summer promotions in prior years, Hudson said.

"Our movie-linked, softer promotional line-up in June and July did not match the traffic that was driven by product bundling in the summer of 2016,” he said. “As we shifted to more aggressive, brand-centric promotions in late summer, we saw traffic and sales declines moderate.” 

Sonic reported that net income for the fourth quarter declined 18.1 percent, to $20.8 million, or 50 cents a share, from $25.4 million, or 53 cents a share, in the same period last year. With refranchising over the past year, revenues also declined, falling 23.8 percent to $123.6 million from $162.1 million in the prior-year quarter.

“We have fully transitioned to a more highly franchised business model and look forward to driving increased cash flow over the next several years,” Hudson said.

Lori Abou Habib
Photo: Sonic Corp.

In June, Sonic named Lori Abou Habib, a 10-year company veteran, as chief marketing officer to succeed Todd Smith, who stepped down in March

“With a new marketing leadership team now in place, we continue to evolve the way we target, market to and engage with our most loyal drive-in customers,” Hudson said.

Sonic has 3,500 locations nationwide. 

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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