Burger King Worldwide Inc.
) second-quarter adjusted earnings per share of 21 cents beat the
Zacks Consensus Estimate of 19 cents by 10.5% and increased 20.1%
year over year. Increased adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) and lower interest
expense contributed to growth.
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Revenue & Margins
Burger King's total revenue plunged 48.5% year over year to
$278.3 million due to the adverse impact of refranchising,
negative currency translation and lower comparable sales.
However, the reported revenues marginally beat the Zacks
Consensus Estimate of $278.0 million. Organically (excluding the
impact of refranchising and currency), revenues nudged up 1.2% in
the quarter thanks to net restaurant growth and positive comps.
Organic adjusted EBITDA grew 2.7% year over year driven by net
restaurant growth and cost containment initiatives. Food and
paper costs as well as occupancy cost ratio were palpably lower
in the quarter.
Overall comps in the quarter nudged up 0.6%, which was also a
sequential improvement from a decline of 1.4%. Improving comps in
Europe, the Middle East, and Africa (EMEA) and Asia-Pacific
(APAC) contributed to the sequential increase. Comps were higher
in the company-owned units as against the franchised ones.
However, quarterly comps compared unfavorably with 4.4% growth
recorded in the year-ago quarter.
Comps grew a respective 2.9% and 3.9% in EMEA and APAC. However,
U.S. & Canada again reported negative comps of 0.5% although
it was much better than the first-quarter's decline of 3.0%. The
Latin America and the Caribbean (LAC) region performed miserably
and posted a comps decline of 2.2%, which was steeper
Although on its way to improvement, a still anemic macroeconomic
environment and stiff competition led to the decline in
U.S. and Canada
comps. However, Burger King remains steadfast in executing its
Four Pillars strategy in this region that includes menu
improvements, marketing initiatives, operational efficiency and
re-imaging in the U.S. and Canada.
The success of Steakhouse Gold premium burgers and the "Trial
Weeks" value promotion in Germany, continued success of "King of
the Day" promotions in the UK, the couponing initiatives in Spain
and a strong performance in the underserved Russian market
facilitated comps growth in the
Continuous poor performance in Mexico and Puerto Rico marred
comps. Further, Brazil, which was relatively better-positioned
last quarter, posted flat sales this quarter hurt mainly by
unexpected temporary store closures due to protests in June.
Management is striving hard to resist the downfall in comps and
hence altered the menu and promotional strategy in Mexico to
increase traffic in the latter half of the year.
, Australia has been the star performer. The region registered
higher levels of sales each month of the quarter powered by value
promotions such as "Shake and Win" and "Penny Pinchers".
Management now plans to foray into the world's sixth most densely
inhabited country - Pakistan.
During the second quarter of 2013, Burger King refranchised 305
units. Burger King seeks to finish its refranchising initiative
Burger King seeks to re-image at least 40% of its U.S. and Canada
restaurants by 2015. In 2012, Burger King completed around 600
re-images, thus refurbishing 19% of the system. So far re-imaged
restaurants have delivered an average sales lift of 10% to 15%,
thus providing an attractive return to franchisees.
Burger King's second quarter results signaled a thorough
sequential improvement across most regions and indicators. The
resiliency of the Eurozone against ongoing recession deserves a
Burger King currently carries a Zacks Rank #2 (Buy). Some
restaurant companies that are worth a look at the current level
Red Robin Gourmet Burgers Inc.
Domino's Pizza Inc.
Famous Dave's of America Inc.
) all of which carry a Zacks Rank #2 (Buy).