- The Washington Times - Wednesday, April 15, 2009

NEW YORK (AP) - Burger King Holdings Inc. reported preliminary revenue for its fiscal third quarter Wednesday that came in below analyst estimates, saying traffic at the fast-food chain’s stores fell sharply in March.

Its shares dropped 17.7 percent on the news, or $4.01, to close at $18.67.

Burger King said preliminary revenue for the quarter ended March 31 totaled $600 million, up 1 percent from $594 million in the same period last year. Analysts polled by Thomson Reuters, on average, had predicted revenue of $625.8 million.

Still, Burger King said it expects third-quarter earnings of 33 cents to 35 cents per share. Analysts predict a profit of 33 cents per share. The company is scheduled to release its full third-quarter earnings on April 29.

The lower-than-expected revenue comes even as the recession spurs more consumers to forgo meals out at pricier sit-down restaurants in favor of fast food or a store-bought meal at home. Fast-food chains _ most notably industry leader McDonald’s Corp. _ have reported strong sales in recent quarters because of their low prices.

Burger King has seen sales rise, but its gains at established locations trailed those of McDonald’s in the last three months of 2008. Burger King reported a same-store sales rise of 2.9 percent worldwide, while McDonald’s said its global same-store sales jumped more than 7 percent jump for the same three-month period.

McDonald’s will report its fiscal first-quarter results next week.

In its fiscal third quarter, Burger King said worldwide sales at locations open at least one year, a key retail metric, rose 1 percent, Burger King said. Same-store sales in the U.S. and Canada climbed 1.6 percent.

Restaurant margins in Germany and Mexico were particularly weak due to the slower traffic, according to Miami-based Burger King.

Investors should keep the March sales slowdown in mind, Standard & Poor’s analyst Mark Basham said, “since it was across most markets, as indicative of further global economic weakness.”

In response to the slower sales, the company stepped up promotions in the two countries. It introduced value-priced combo meals and relaunched its 0.99 euro value meal in Germany. In Mexico it will “aggressively” promote its value meal and boost advertising spending.

Burger King said same-store sales have improved so far in April because of those initiatives in Mexico and Germany and a shift in the calendar that put Easter in April this year rather than March.

Basham kept his “Hold” rating on the shares but lowered his earnings estimate for the quarter and 2010 fiscal year. He also cut his target price by $2 to $20.

___

AP Business Writer Mae Anderson contributed to this report.

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