Burger King Q2 net income down on stronger dollar

Burger King Holdings Inc. reported a 10-percent decrease in fiscal second-quarter net income, as a stronger US dollar took a toll on earnings despite improved sales.

 

The quarter's results were below analysts' expectations, and the stronger dollar prompted the fast-food restaurant operator to lower its earnings outlook for the year.

 

Burger King reported net income for the quarter ended Dec. 31 of US$44 million, or 33 cents a share, down from US$49 million, or 36 cents, a year earlier. Burger King said currency fluctuations cut profit by 5 cents a share.

 

Revenue climbed 3.4 percent to US$634 million. Same-store sales were up 2.9 percent worldwide, including 1.9 percent in the US and Canada.

 

Analysts, on average, expected per-share earnings of 37 cents with revenue of $659 million.

 

Restaurant margins fell to 13.7 percent from 15.6 percent.

 

Many multinational corporations have taken earnings hits in recent months as the newfound strength of the dollar has hurt profits when they're exchanged into US currency. Recently, fast-food operators McDonald's Corp. and Yum Brands Inc. both reported such impacts in their quarterly earnings.

 

Burger King stores also posted sales gains below what some analysts were expected, possible signs that consumers are looking to reign in spending even when going out for low-cost meals.

 

"Even the fast-food operators are facing some incremental sales pressures in the US from the slowing economy," said Telsey Advisory Group restaurant analyst Tom Forte, who was looking for a 3.9-percent increase in worldwide same-store sales. But Burger King, he said, "is very well positioned to take advantage of the consumer trading down."

 

Discounts and value menus remain popular with fast-food chains, such as McDonald's, whose latest profits topped analysts' estimates, as cash-strapped consumers sought out its cheaper eats.

 

Some analysts have suggested that the company could be losing sales to rivals that have a bigger share of discount consumers. The launch of mini-burgers may boost sales in that area.

 

The chain is also adding premium products like its new Angry Whopper sandwich to try to boost check sizes, and plans to open its first smaller and more upscale Whopper Bars this month.

 

Burger King posted its best quarterly development rate in eight years, opening 125 new restaurants, up 19 percent. The company is on target to meet its fiscal-year plan to increase its restaurant count by 350 to 400.

 

Burger King Chairman and Chief Executive John Chidsey on Thursday (Feb 5) cautioned the stronger dollar may continue to hurt profits, though he said results would continue to benefit from easing food and energy costs, expected sales gains from new and recently re-imaged restaurants and product launches and marketing promotions.