UPDATE 5-Burger King profit tops Street view, shares rise

* Q2 EPS 37 cents; Street view 34 cents

* Q2 revenue up 2 percent to $645.4 mln

* Plans breakfast value offer in April

* Shares up more than 4 percent
(Adds CEO comment; updates share activity)

By Lisa Baertlein

LOS ANGELES, Feb 4 (BestGrowthStock) – Fast-food chain operator
Burger King Holdings Inc (BKC.N: ) posted quarterly results that
topped analyst forecasts, helped by its $1 double cheeseburger
offer and lower expenses, and shares jumped more than 4

The cheeseburger promotion helped drive more people into
Burger King’s stores at a time when investors were concerned
that high unemployment would reduce demand.

Sales at established U.S. Burger King restaurants fell
during the quarter, but the drop was not as steep as the 8
percent decline posted by rival Yum Brands (YUM.N: ), home to the
Taco Bell, Pizza Hut and KFC chains. [ID:nN0356760]

Buckingham Research analyst Mitchell Speiser said the stock
move was a reaction to “less worse than dire expectations.”

“Trends are still very weak and earnings estimates are
still likely to come down, but not as much as feared,” Speiser
said. “In my opinion there was nothing fundamentally better
than expected to attract long-term interest in the stock.”

Burger King’s worldwide same-store sales were off 2 percent
in the quarter, driven by a 3.3 percent decline in the United
States and Canada.

Rival McDonald’s Corp (MCD.N: ) said last month U.S.
same-store sales gained 1 percent in December after two months
of declines. [ID:nN22203005]

Burger King, also known as the home of the Whopper,
reported net income of $50.2 million, or 37 cents a share, for
the second quarter ended on Dec. 31. That was up from $44.3
million, or 33 cents a share, a year earlier.

Results from the most recent quarter topped analysts’
expectation for a profit of 34 cents per share, according to
Thomson Reuters I/B/E/S.

Burger King shares gained 75 cents to $18.25. McDonald’s
fell 1.2 percent and Yum shed nearly 5 percent.


Revenue rose to $645.4 million, above analysts’ estimates
for $634.8 million, helped by an increase in the number of
Burger King restaurants. Worldwide restaurant margin also
improved a better-than-expected 20 basis points to 13.8

Bernstein analyst Sara Senatore said a lower tax rate
helped drive the profit beat. Earnings got an additional lift
from lower interest expenses, a drop in food and paper costs as
well as favorable currency exchange.

After weathering the U.S. economic downturn better than
most other restaurant categories, the lower-priced fast-food
segment has seen demand flag. Unemployment among young males
and minority groups — who account for a big share of fast-food
sales — is far worse than the 10 percent U.S. jobless rate.

Chief Executive John Chidsey said more people came into
Burger King restaurants during the December quarter and bought
promotional items like the $1 double cheeseburger. The downside
was that those bargain-hunting diners spent less per visit.

“In this environment, your first job is to get people in
the door,” said Chidsey.

The next step, he added, is getting those customers to
spend money on things like higher-profit drinks, snacks,
premium sandwiches or desserts. Along those lines, Burger King
will begin advertising its Steakhouse XT burger nationwide
later this month.

Burger King also plans to promote breakfast value deals in
April, as McDonald’s continues promoting its new breakfast
Dollar Menu.

As discounting rages, analysts continue to monitor friction
between Burger King and its franchisees, who have complained
that discounts and promotions used to lure more traffic are
making it harder for them to turn profits.

Meanwhile, McDonald’s — the industry’s 800-lb gorilla —
continues to grab share.

Earlier this week, McDonald’s Chief Executive Jim Skinner
said December’s increase in U.S. same-store sales was a
“sustainable result” in the longer term, despite a January
lull. [ID:nLDE6101VB]

Stock Market Research

(Reporting by Martinne Geller; Editing by Lisa Von Ahn, Dave
Zimmerman, Gunna Dickson and Steve Orlofsky)

UPDATE 5-Burger King profit tops Street view, shares rise