Atlanta, Ga.-based quick-service restaurant chain
AFC Enterprises Inc.
) second-quarter 2013 adjusted earnings of 35 cents per share
beat the Zacks Consensus Estimate of 33 cents by 6.1% and the
year-ago quarter figure of 27 cents by 29.6%. Earnings in the
quarter received a boost from the company's higher top line and
AFC Enterprises' total revenue came in at $47.9 million in the
second quarter, up 21% from the year-ago quarter, thanks to
higher sales gain at the company-operated and franchised
restaurants, positive global same-store sales (comparable sales)
and unit growth. The revenues in the quarter also surpassed the
Zacks Consensus Estimate of $46 million by 4.1%.
Behind the Headline Numbers
AFC Enterprises' total revenue primarily comprises
company-operated restaurant sales, franchise revenues as well as
rent and other revenues.
Company-operated restaurant sales were up 22.4% year over year
to $17.5 million, driven by unit growth in the domestic market.
Although comparable sales (comps) were positive at 1.7%, this was
much lower than the year-ago quarter's comps of 7.8%. Franchise
revenues increased 19.8% year over year to $29.1 million, driven
by higher comps growth at franchise restaurants. Rent and other
revenues also grew 30% year over year to $1.3 million.
In the second quarter, the company's global same-store sales
rose 4.4%, resulting from a 4.3% upside in domestic same-store
sales and a 5.8% jump in international franchisee same-store
In the quarter, operating profit was $14.5 million, up 27.2%
year over year. Company-operated restaurants' operating margin
expanded 80 basis points (bps) to 18.3% with the rise in revenues
and higher food cost margins.
The Popeyes system opened 44 restaurants in the second
quarter, of which 29 were domestic and 15 international. At the
end of the quarter, the company had 2,153 restaurants, among
which 1,674 were company-owned and 432 international units.
During the quarter, AFC Enterprises shut down 16 restaurants.
The quick-service chicken restaurant chain expects to open 175
to 195 restaurants, of which 60 will be located abroad. Net
restaurant openings will likely range from 85-115 in 2013. In
2013, the company also intends to launch 8-10 company-owned
restaurants, higher than the prior guidance of 6-10.
The company bought back nearly 1 million shares worth $3.4
million during the quarter.
Following solid sales results in the past two quarters, the
company has raised its comps guidance for 2013. AFC Enterprises
now expects same-store sales to grow in the range of 3.5%-4.5% in
2013, up from the previous estimates of 3.0%-4.0%.
However, the company reaffirmed its earnings guidance for
2013. It continues to expect adjusted earnings per share to be
within $1.37 and $1.42. For 2013, AFC Enterprises set a target of
approximately $15 million to $20 million for share buyback.
In the long term, the company continues to expect comps to be
positive, ranging from 1% to 3% and net unit to grow in the range
of 4%-6%, whereas earnings per share are projected to improve
The company has been consistently posting solid earnings and
revenue growth in the past two quarters on the back of its
domestic expansion and unit growth. The company's five strategic
plans including development of the Popeyes brand, providing more
value-added services through its restaurant concepts,
strengthening of restaurant profit margin with cost-saving
initiatives, higher new unit growth and improving its work
culture are expected to spur growth. Moreover, AFC Enterprises
with its solid product pipeline and better operational strategy
is well positioned to perform better in the future. However,
higher commodity inflation could weigh on the Zacks Rank #3
(Hold) company's results, going ahead.
Other players in the restaurant industry that are expected to
perform well include
Domino's Pizza, Inc.
Yum! Brands, Inc.
Cracker Barrel Old Country Store, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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