) second quarter fiscal 2013 adjusted earnings of 5 cents per
share increased 66.7% year over year and beat the Zacks Consensus
Estimate by 25.0%. The year-over-year increase came mainly on the
back of cost efficiency.
Total revenue in the reported quarter dipped 3.5% year over
year to $111.1 million, which missed the Zacks Consensus Estimate
of $113.0 million. Sluggish comparable store sales (comps) led to
lower revenues in the quarter.
System-wide comparable store sales (comps) for the quarter
were flat (versus 3.5% increase recorded last year), which
comprised increases of 1.9% in company-owned outlets (versus 3.1%
growth recorded last year) and 0.3% decline in comps at
franchised drive-ins (versus 3.6% rise in the year-ago period).
One less operating day than the prior year owing to the leap year
hurt comps in the quarter.
This drive-in fast-food restaurant chain saw a significant
decline in its cost structure, driving its profits higher. Food
and packaging expenses fell 20 basis points (bps) to 28.1% as a
percentage of revenues. Other operating expenses declined 130 bps
Lower costs led to 140 basis points improvement in
company-owned drive-in margins. Continued growth in margins
reflects improving fundamentals of the company.
Oklahoma-based Sonic opened 3 franchised and closed 22
franchised and 4 company-operated drive-ins in the second
quarter. As many as 34 company operated drive ins were sold to
franchisees in the quarter.
As of Feb 28, 2013, the drive-in fast food chain operator had
3,526 drive-in restaurants. Management expects new franchise
drive-in openings to be slightly higher in fiscal 2013 than
fiscal 2012. However, Sonic anticipates the rate of growth to
accelerate in 2014.
For fiscal 2013, Sonic expects positive comps in the low
single digits. Improvement in restaurant level margin will depend
on same store sales growth and is expected to expand 50-100 basis
points. Sonic also expects to generate $45 million to $50 million
in free cash flow in fiscal 2013.
Better performance of company-owned stores as against
franchised ones speaks of Sonic's efforts to develop inherent
strength. Initiatives that will place the company in a better
position in a competitive setting include closure of
underperforming units, focus on smaller prototypes to improve
return on investment; multi-layered growth strategy, execution of
a point-of-sale system and increased media spending.
However, there is still not much clarity as far as the
company's sales scenario is concerned. Stiff competition in the
marketplace and waning consumer confidence remain concerns for
Sonic currently retains a Zacks Rank #2 (Buy). Some
other restaurant industry stocks currently performing well
Red Robin Gourmet Burgers Inc.
Burger King Worldwide Inc.
Cracker Barrel Old Country Store Inc.
). While Red Robin carries a Zacks Rank #1 (Strong Buy), Burger
King and Cracker Barrel hold a Zacks Rank #2 (Buy)
BURGER KING WWD (BKW): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
SONIC CORP (SONC): Free Stock Analysis Report
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