Burger King Profit Falls
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NEW YORK — Burger King Holdings Inc., the home of the Whopper, said Thursday that its profit dropped 10 percent in its fiscal second quarter as foreign currencies yielded fewer dollars. The nation's No. 2 hamburger chain also cut its full-year earnings forecast.
Miami-based Burger King said its net income fell to $44 million, or 33 cents per share, from $49 million, or 36 cents per share, a year ago. Analysts polled by Thomson Reuters had expected a profit of 37 cents per share.
The miss came mainly from the effect of the stronger dollar, which hurt earnings by 5 cents per share. Companies with global operations translate sales and franchise revenues that are in foreign currencies into dollars.
That can boost revenue and profit when the exchange rate is favorable, but hurt results when the U.S. currency is stronger and foreign sales thus translate into fewer dollars.
"The complexity and rapidity in currency fluctuations during our second fiscal quarter, created by uncertainties in the currency markets, was difficult to forecast and anticipate," Chief Executive John Chidsey said in a statement.
The stronger dollar has been affecting a number of restaurant chains with big businesses overseas. Both McDonald's Corp. and Yum Brands Inc., which operates KFC, Pizza Hut and Taco Bell, have said that foreign exchange rates hurt their most recent results.
Burger King to chopped its profit guidance for the year because of the dollar's strength.
The company now expects to earn between $1.44 and $1.49 per share in 2009, down from $1.54 to $1.59 per share. Analysts expect $1.52 per share. The new estimate assumes that currency rates will strip 10 cents per share out of profit during the year.
Although currency rates have cut into profits, sales have kept growing despite the deepening recession _ or perhaps because of it.
Revenue rose 3 percent to $634 million from $613 million. Analysts had predicted higher revenue of $658.6 million. Same-store sales, or sales at locations open at least a year, rose 2.9 percent worldwide and 1.9 percent in the U.S. and Canada.
Burger King said its U.S. same-store sales bump also stemmed from raising prices on certain menu items and its mix of value products and those that are a bit pricier, like the company's new Steakhouse XT extra thick burger.
Like its fast-food cohorts, Burger King may be benefiting from consumers cutting back on eating out in pricier restaurants. With less cash to spend, some consumers are now visiting chains like Burger King and McDonald's more frequently to take advantage of value meals.
McDonald's, the leader in the fast-food category, said last week that its same-store sales in the U.S. rose 5 percent in the fiscal fourth quarter.
Burger King said it still expects to open between 350 and 400 new restaurants during the year.
The company added it will keep adding restaurants to its list of locations that are open 24 hours _ a key strategy for the chain to grab market share during late-night hours when teens and young adults are likely to look for a snack.
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LAUREN SHEPHERD 02/ 5/09 08:48 AM ET Associated Press