Shares of Florida-based
Burger King Worldwide Inc.
) rose more than 2% as the company reported better-than-expected
first-quarter results. Investors were particularly encouraged as
the company's profit margins increased mainly on the back of
cost-cutting, which masked weak sales in the U.S.
Burger King's first-quarter 2014 adjusted earnings per share of
20 cents beat the Zacks Consensus Estimate by a penny. Also,
earnings increased 19.3% year over year driven by lower operating
cost and expenses.
Burger King's total revenue dropped 26.5% year over year to
$240.9 million due to the currency headwinds, adverse impact of
refranchising of company-owned restaurants. Quarterly revenues,
however, beat the Zacks Consensus Estimate of $240.0 million by
Organically (excluding the impact of refranchising and currency)
however, revenues increased 6.2% year over year due to net
restaurant growth and comps growth.
Overall comps in the quarter nudged up 2.0%, higher than the
prior-quarter comps growth of 1.7%. Comps in the quarter also
compared favorably with comps decline of 1.4% in the year-ago
quarter as strong international performance made up for weaker
comps in the U.S. & Canada due to severe weather.
Burger King witnessed 0.1% comps growth in the U.S. & Canada,
down from the prior-quarter comps growth of 0.2%, but
considerably better than the year-ago quarter's decline of 3.0%.
Despite severe winter, the U.S. and Canada delivered slightly
positive comps growth in the first quarter primarily on the back
of menu innovation. Going forward, the company remains focused on
further driving its franchise profitability through ongoing
initiatives to simplify its menu and in-restaurant operations.
Comps grew 4.8% in the Europe, the Middle East, and Africa (EMEA)
region, an improvement from prior-quarter level of 3.3% and the
year-ago quarter's level of 0.8%. The upside represented the 13
consecutive quarter of comparable sales growth in the region.
Performance was primarily driven by continued strength in
Germany, where premium limited time offerings along with the
Trial Weeks value platform boosted sales growth. In the United
Kingdom, value menus helped boost traffic. Additionally, the
company introduced the low-calorie Satisfries across major
European markets, which further boosted sales in the region. EMEA
system-wide sales growth of 14.6% was primarily attributable to
340 net new restaurant openings over the last year.
The Latin America and the Caribbean (LAC) region posted positive
comps of 4.0% in the quarter, up from 1.8% in the prior quarter
and negative comps of 1.3% in the year-ago quarter, gaining from
solid traffic growth in Brazil. The company's limited-time
offerings augmented sales in Brazil during the quarter. LAC
system-wide sales growth of 17.1% included the positive impact of
156 net new restaurant openings in the past twelve months.
The Asia Pacific (APAC) region continues to perform well with
3.8% comps growth, higher than the year-ago quarter's level of
2.7%, but lower than the prior-quarter's level of 6.2%. The
year-over-year comps growth was driven by strong business across
Australia and South Korea. China also performed well in the
quarter benefiting from the company's value promotions and menu
improvement initiatives. APAC system-wide sales growth of 15.0%
was primarily driven by 235 net new restaurant openings over the
past twelve months.
Organic adjusted EBITDA grew 12.5% year over year to $159.7
million with solid EBITDA growth across EMEA, LAC as well as APAC
Selling, general and administrative expenses declined 27.7% year
over year to $48.2 million. Total operating costs and expenses
declined 51.4% year over year to $109.6 million.
Performance of other Restaurateurs
Among other restaurateurs, California-based
The Cheesecake Factory Inc.
) posted adjusted earnings of 43 cents per share, which missed
the Zacks Consensus Estimate of 49 cents by 12.2%. The downside
reflected higher expenses.
Brinker International, Inc.
) fiscal third-quarter 2014 adjusted earnings of 84 cents per
share were in line with the Zacks Consensus Estimate.
Despite posting higher earnings in the quarter, Burger King's
revenues have been soft due to difficult consumer discretionary
environment in the U.S. and the the sluggishly recovering
economy, which continues to hurt consumers' discretionary
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
franchising. Additionally, we are encouraged by its cost cutting
initiatives which are expected to boost bottom-line growth in the
Burger King, currently, carries a Zacks Rank #2 (Buy).
Among other restaurants,
The Wendy's Co.
) is scheduled to report its earnings on May 8.
BURGER KING WWD (BKW): Free Stock Analysis
CHEESECAKE FACT (CAKE): Free Stock Analysis
BRINKER INTL (EAT): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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