Burger King Worldwide Inc.
) posted mixed fourth-quarter 2013 results. Burger King's
fourth-quarter adjusted earnings per share of 24 cents beat the
Zacks Consensus Estimate by a penny. Also earnings increased
22.4% year over year driven by higher adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) and lower
operating cost and expenses.
Following the release of fourth-quarter results, the company's
share price rose 1.1%.
Burger King's total revenue dropped 34.4% year over year to
$265.2 million due to the currency headwinds, adverse impact of
refranchising, lower company restaurant sales and muted
comparable sales (comps) growth. Quarterly revenues also
marginally missed the Zacks Consensus Estimate of $267.0 million
Organically (excluding the impact of refranchising and
currency) however, revenues increased 5.2% in the quarter thanks
to net restaurant growth and higher comps in the Europe, Middle
East and Africa (EMEA) and Asia Pacific (APAC) regions.
Overall comps in the quarter nudged up 1.7%, higher than the
third-quarter comps growth of 0.9% but lower than the year-ago
quarter's comps of 2.7%. Comps in the quarter were affected by
weak performance in U.S. & Canada region, offset by solid
comps results in both APAC and EMEM regions.
Burger King witnessed 0.2% comps growth in
U.S. & Canada
, down from the year-ago quarter's level of 3.7% but better than
third-quarter's negative comps of 0.3%.
The sluggish macroeconomic environment and stiff competition
led to such lower comps results in the region. In an attempt to
counter the downfall in comps, management has altered the menu
and undertaken promotional strategies in the region to increase
traffic. Burger King remains steadfast in executing its Four
Pillars strategy in this region that includes menu improvements,
marketing initiatives, operational efficiency and re-imaging.
Comps grew 3.3% in the
region, higher than the year-ago quarter's level of 1.7%.
Quarterly comps received a boost from the company's value
promotion platform "Trial Weeks" in Germany. The company also
performed well in Spain gaining from its promotional effort.
Latin America and the Caribbean (LAC)
region posted positive comps of 1.8% in the fourth quarter
gaining from solid traffic growth in Brazil. The company's
limited-time offerings augmented sales in Brazil during the
region continues to be the star performer with 6.2% comps growth,
significantly higher than the year-ago quarter's level of 0.8%,
driven by strong business across Australia and South Korea. China
also did well in the quarter benefiting from the company's value
promotions and menu improvement initiatives.
Organic adjusted EBITDA grew 14.3% year over year to $182.1
million with solid EBITDA growth across EMEA, as well as APAC
region and lower general and administrative expense (G&A).
Adjusted EBITDA margins were 68.7%, significantly higher than the
year-ago level of 42.6%, driven by refranchising efforts and cost
Food, paper and product costs as well as occupancy and other
operating costs ratio were considerably lower in the quarter.
Full-Year 2013 Highlights
Adjusted earnings per share in full-year 2013 were up 22.4%
year over year to 84 cents per share, beating the Zacks Consensus
Estimate of 83 cents by a penny. Revenues were $1.15 billion,
down 41.8% year over year, but in line with the Zacks Consensus
Refranchising & Re-imaging
In 2013, Burger King finished its global refranchising
efforts. The company unveiled a total of 670 restaurants
worldwide and completed re-imaging another 600. The company has
also remodeled nearly 30% of its U.S. & Canada restaurants in
Even though Burger King posted higher earnings in the quarter,
its revenues have been soft due to difficult consumer
discretionary environment in the U.S. Government budget cuts,
high tax rates and still-tightened credit availability continue
to hurt consumers' discretionary spending.
However, Burger King's menu improvement initiatives, reimaging
efforts and marketing promotions are expected to bode well for
future growth. We believe the company safeguards its position and
growth prospects amid a sluggish macro-environment through
Other Stocks to Consider
Burger King Worldwide currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the restaurant industry include
Fiesta Restaurant Group, Inc.
Brinker International, Inc.
Buffalo Wild Wings Inc.
). While Fiesta Restaurant sports a Zacks Rank #1 (Strong Buy),
Brinker and Buffalo Wild Wings carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
BUFFALO WLD WNG (BWLD): Free Stock Analysis
BRINKER INTL (EAT): Free Stock Analysis
FIESTA RESTRNT (FRGI): Free Stock Analysis
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