Franchise News

Burger King Reports Earnings Double in 1Q, Revenue Drops

Apr 26, 2013 02:46 PM EDT | By Staff Reporter

Burger King's earnings in the first quarter doubled in spite of revenue falling, as the fast-food chain slashed several restaurant-related expenses.

The Miami-based company had said earlier this month that sales at established restaurants were slated to drop during the quarter, and they wound up declining 1.4 per cent. That includes a 3 per cent drop in the United States and Canada.

According to the earnings report, Burger King earned $35.8 million, or 10 cents a share, in the first quarter, up from $14.3 million and 4 cents a share last year. Adjusted earnings were 17 cents a share, as analysts expected. Operating expenses were down sharply, by $260.5 million, as fewer restaurants were company owned, which boosted profitability.

Excluding special items related to operational expenses, earnings were $60.1 million, or 17 cents per share, up from $39.8 million, or 11 cents per share last year. Analysts expected to see earnings of 17 cents per share.

During the quarter, total operating expenses were reduced by -54%, but were offset by higher franchise and property expenses which rose by 53%.

Same store sales declined -3% in the U.S. and Canada region, and -1.3% in Latin America. On the upside, same store sales in Europe, the Middle East, and Africa rose 0.8%, while Asia Pacific sales increased 2.7%.

Fast -food chains so far this year have been pushing continual value-centric marketing, in part in hopes of mitigating tough comparisons because of last year's weather. McDonald's, by far the biggest fast-food chain, focused heavily on value promotion in the first quarter, particularly its dollar menu, even adjusting its marketing calendar late last year to accommodate the value messaging.

Wendy's this year has also been promoting a value message, but has been focusing more on value as "more than a low price," according to a recent ad. Its new Right Price, Right Size menu has been marketing prices that range from 99 cents to $1.99.

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