Burger King 2Q profit rises, focuses on overseas
Thursday, August 2, 2012
NEW YORK (AP) — The home of the Whopper is on a mission: bring more food options to customers and expand overseas. Burger King’s plan appears to be working so far, with the chain’s net income surging 60 percent in the second quarter.
As the fast-food market becomes increasingly crowded at home, Burger King — like other companies — has concentrated on growing abroad. In the past year, 80 percent of new store openings have been in Europe, the Middle East and Africa.
During the second quarter it worked out joint ventures with Russia and China. The Russian joint venture will see several hundred restaurants open there over the next few years, while the China deal will bring 1,000 restaurants to the country over the next five to seven years. Burger King says this is the biggest multi-unit development agreement in its history.
Back in the U.S., Burger King has been working to refresh its outdated image and win back lost market share. The Miami company launched its biggest menu expansion ever in April, with items including fruit smoothies, specialty salads and coffee frappes.
Still, CEO Bernardo Hees said during a conference call on Wednesday that there is still work to do.
“We are still early in the process of enhancing the image and overall cost and experience of Burger King restaurants,” he said.
Burger King Worldwide Inc., which began trading publicly again in June, reported net income of $48.2 million, or 14 cents per share, in the quarter ended June 30. That’s up from $30.2 million in the year-ago period, when the company was privately held.
Removing stock-based compensation expense and other items, earnings were 17 cents per share.
Revenue dropped 9 percent to $540.8 million from $595.4 million. But Burger King said that revenue at locations open at least a year — a key gauge of a retailer’s health— climbed 4.4 percent.
Hees said that the company’s efforts to revamp its menu and remodel restaurants in the U.S. and Canada are showing tangible results.
Steven Wiborg, president of North America, says new drinks and chicken offerings have done particularly well, and that the company’s recently relaunched summer BBQ menu is part of its strategy to include limited-time offerings for customers.
Locations in Latin America and the Caribbean reported a 10.5 percent jump in revenue at locations open at least a year, led by Brazil and Mexico. In the U.S. and Canada, the metric climbed 4.4 percent thanks to the addition of menu items like wraps and frappes. The Asia Pacific region and Europe, the Middle East and Africa also posted increases in the figure.
Burger King’s knows these results are important to maintain and grow in order to keep pace in the cutthroat fast-food industry. While the company has more than 12,600 restaurants worldwide, that figure is dwarfed by McDonald’s Corp.’s 33,000 locations. But last week McDonald’s actually showed some signs of wear and tear from global economic pressures, announcing that its second-quarter performance fell short of Wall Street’s view.
Burger King also faces off against rivals such as Wendy’s Co. and has to keep a close eye on chains like Chipotle Mexican Grill Inc., which is increasingly currying favor with diners. Chipotle reported last month that its second-quarter earnings jumped 61 percent, but its revenue growth misses analysts’ expectations.
Burger King last traded as a public company between 2006 and 2010 before it was purchased and taken private by investment firm 3G Capital.
The company’s return to the NYSE wasn’t through an initial public offering. Instead, 3G Capital announced an unusual deal in April to sell a minority stake to Justice Holdings Ltd., a London-based shell that was specifically set up to invest in another company. 3G Capital received $1.4 billion in exchange and retains a 71 percent stake in the company.
That stake was worth about $3.6 billion based on Burger King’s opening share price, meaning that, on paper, 3G Capital has more than earned back the $3.26 billion it paid for Burger King in 2010.
Burger King’s stock slipped 8 cents to close at $15.24 Wednesday. They peaked at $16.31 per share on June 21.
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