Burger King growth highlights strong fast-food demand

Posted by Editorial on 30th April 2009

The world’s second largest burger chain has recorded another rise in profits as consumers continue to demand the low prices and convenience of fast-food chains.

Comparable sales rose one per cent for the third quarter despite one less trading day and were driven by a combination of indulgent and value offerings, according to the company. The Angry Whopper sandwich and launch of BK Burger Shots and BK Breakfast Shots in February were key to a strong US result. The company noted a marked deceleration of sales in March, however, with Germany and Mexico markets most affected.

“We continue to post top-line growth even in this challenging macroeconomic environment,” said John Chidsey, Chairman and CEO of Burger King. “We delivered our 21st consecutive quarter of worldwide positive comp sales, our annual net restaurant growth remains on track and our cash flow generation remains strong.”

“While we performed well in January and February, the unexpected decline in March traffic across many of the countries in which we operate, particularly the Germany and Mexico markets, adversely affected our results.”

“Although disappointed in our company restaurant margins, we are pleased to have been able to offset the earnings impact with continued revenue growth, general and administrative (G&A) cost reductions, lower interest expense and tax savings. I am also pleased with how the team rapidly readjusted our marketing efforts toward more value focused promotions and menu offerings,” Mr Chidsey added.

The company expects to benefit from increased marketing activities, net restaurant openings and lower food and energy costs but is now taking a more conservative view on fourth quarter earnings.

“We continue to grow our top-line in this challenging economic environment with positive April comps and are tactically responding to ever-changing market dynamics. However, due to ongoing market challenges and unknown potential effects of the Swine Flu situation, we are taking a more conservative outlook to our fourth quarter fiscal year 2009 earnings estimate,” Chidsey said.

“Our cash flows remain strong and we continue to invest – building new restaurants and re-imaging existing ones, introducing new products and extending hours of operations. Going forward, we believe that improving commodity costs and our disciplined focus on driving G&A efficiencies will contribute to overall earnings improvement,” he concluded.