Burger King Conquers Quarterly Increases
Burger King Holdings Inc., operator of the Burger King fast food restaurant chain, increased revenues and comparable stores sales during Q3 fiscal 2009 (ended March 31, 2009). Selected financial highlights and other analysis follow:
Revenues Improve a Bit
Burger King reported total worldwide revenues of $600 million in the third quarter, a 1% improvement from $594 million in Q3 2008. The retailer said this result includes an unfavorable $44 million impact from fluctuations in world currency rates.
Comparable Store Sales Leap Over 2008 Results
Quarterly comparable store sales increased both worldwide and in the U.S. and Canada. Worldwide, comparable store sales grew 1%, and U.S./Canada comparable store sales increased 1.6%. Burger King said there was a 1% negative impact both worldwide and in the U.S. and Canada resulting from 2008 being a leap year. The retailer attributed comparable store sales growth to the introduction of new menu items and longer operating hours.
March Traffic Decline Hurts Margins
Burger King’s quarterly gross margins declined from 13.2% to 11.7%. The retailer attributed the decline to labor inefficiencies caused by an unexpected drop in March customer traffic, new wage laws and labor contracts in Germany, and increases in worldwide food, paper and product costs.
Operating Income Goes Down, Net Income Rises
Quarterly operating income declined 6%, from $81 million to $76 million, due to higher operating costs and expenses. However, net income grew 15%, from $41 million to $47 million, due to lower interest expense, income before income taxes, and income tax expense.
Burger King Experiments with Food, Concepts
Burger King underwent notable experiments with food and restaurant concepts during Q3 2009. The retailer tested more than 45 new menu items, including non-traditional items such as a grilled salmon sandwich and steak kabob. Burger King also opened its first Whopper Bar café-style restaurant in Orlando, FL and continued piloting an interactive, urban-themed restaurant concept called Burger King Studio at locations in Orlando and Chicago, IL.
Competitive Comparison with McDonald’s
Burger King’s chief fast food rival, McDonald’s, reported comparable store sales increases of 4.3% globally and 4.7% in the U.S. during its Q1 2009, which corresponds with Burger King’s Q3 2009. McDonald’s also reported a 4% drop in consolidated operating income and 10% drop in consolidated revenues, which it attributed to foreign currency exchange rates. McDonald’s net income improved 4% and gross margins rose from 26.1% to 27.6%.
Burger King added a net of 53 new restaurants during the quarter. The retailer operates more than 11,800 restaurants worldwide.