On Sep 12, restaurateur
) pre-announced its same-store sales and earnings for the fourth
quarter of fiscal 2013, which is scheduled to be reported on Oct
21, 2013. The company has also provided its fiscal 2014 outlook.
For the fourth quarter fiscal 2013, Sonic estimates comparable
store sales (comps) growth of 5.9% compared with a 2.3% growth
recorded in the year-ago period. The Summer of Shakes promotion
and the limited time offer of pretzel dogs boosted comps in the
quarter. Further, comps are estimated to increase 2.3% for fiscal
On the flip side, food costs related to the promotions were
adversely affected by the product mix shift. Taking into account
the improving comps and higher costs, the company expects
adjusted earnings per share to be 30 cents in the fourth quarter
compared with 25 cents recorded in the year-ago period.
Fiscal 2014 Outlook
Okla.-based Sonic expects positive same-store sales in low-single
digit for fiscal 2014, driven by sales-building initiatives.
Same-store sales growth will pick up in the latter half of the
year with the implementation of a new point-of-sale system and
digital point-of-purchase technology. The improvement will be
more pronounced in the company-owned drive-ins.
Initiatives that will place the company in a better position amid
a competitive setting include closure of underperforming units,
focus on smaller prototypes to improve return on investment, a
multi-layered growth strategy, execution of a point-of-sale
system and increased media spending.
Drive-in-level margins are expected to improve 75 to 100 basis
points backed by labor efficiencies and comps growth. Selling,
general and administrative expenses are expected in the range of
$69-$70 million and depreciation and amortization expenses are
projected in the $42.5-$42 million range for fiscal 2014.
For 2014, the company projects interest expenses of roughly $25.0
million and income tax rate of approximately 37% to 37.5%.
Capital spending is estimated in the $65-$70 million range.
Free-cash flow is expected to range between $15 million and $25
million, a portion of which will be used to repurchase shares.
Sonic presently has more than 3,500 drive-in restaurants and
expects to open 40-50 new franchise drive-ins in 2013. New
company-owned drive-ins are however not on the agenda as Sonic
remains focused on performance rather than expansion. There will
be lesser number of shutdowns in 2013.
Robust comps expectation for the fourth quarter encouraged
investors. After clocking just 0.1% increase in the third
quarter, the recent upside came as a pleasant surprise. Following
the sturdy comps expectation, shares of Sonic surged 2.17% as of
Sep 16, 2013. Additionally, expectations of higher company-owned
comps in 2014 as against franchised ones indicate Sonic's
inherent strength. Overall, Sonic is gradually moving in a
Estimates Trending Higher
Following the release of bullish data, estimates have been moving
north with 6 out of 8 analysts raising their estimates for the
upcoming quarter. The Zacks Consensus Estimate for the fourth
quarter and fiscal 2013 are pegged at a respective 30 cents and
72 cents, representing year-over-year increases of 19.0% and
19.4%. The Zacks Consensus Estimate for fourth quarter and fiscal
2013 revenues are pegged at $156.0 million and $541.0 million,
Sonic currently retains a Zacks Rank #2 (Buy). Other players in
the restaurant industry, which look attractive at current levels,
Domino's Pizza Inc.
Burger King Worldwide Inc.
), all with a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
SONIC CORP (SONC): Free Stock Analysis Report
WENDYS CO/THE (WEN): Free Stock Analysis
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