Posted at: 10/28/2013 1:06 PM
By CANDICE CHOI and MICHELLE CHAPMAN
Burger King sees early promise in Satisfries
(AP) NEW YORK - Burger King says it’s attracting more customers with its new lower-calorie fries but is being careful not to call them a home run yet.
The Miami-based company said Monday that it saw sales trends in North America turn positive after last month’s launch of "Satisfries," which have 20 percent fewer calories than its regular fries because of a batter that absorbs less oil.
"It brought in incremental consumers who would otherwise not have come into Burger King," said Alex Macedo, the chain’s president of North American operations. He noted that other promotions also played a role in improving sales and stressed that the economic climate nevertheless remained challenging.
The move into positive sales territory in October comes after Burger King said that sales slipped 0.3 percent at North America restaurants open at least a year during its third quarter. Satisfries, which cost around 30 cents more than regular fries, weren’t introduced until the last week of the quarter, which ended Sept. 30.
The company blamed the quarterly sales dip on intensifying competition and a soft economy. Its net income rose sharply, however, as a result of reduced restaurant expenses and growth overseas.
Executives at McDonald’s have also been blaming weak sales on the double whammy of heightened competition and a choppy economy. But other chains such as Chipotle and Starbucks have reported healthy sales, suggesting people are willing to spend on certain types of food and drinks.
As they fight to keep drawing in customers, McDonald’s, Burger King and Wendy’s have pushed deals more aggressively. Macedo noted that Burger King’s deals are designed to maintain profit margins. A deal that offers two sandwiches for $5, for example, on average gets people to spend about $9 when including sides and drinks, he said.
As for Satisfries, the initial increase in customer visits Burger King saw may be tied to the fanfare and promotions around the launch. McCain Foods, which supplies the fries, has said it plans to work with other restaurant operators to sell the reduced-calorie fries.
"They’ve only been out there for four weeks, so it’s premature to say whether it’s a home run or not," Macedo said. Either way, he noted that they weren’t going to "turn around the business."
The fries are just the latest gambit by Burger King Worldwide Inc. to boost its image. The company has been revamping its business since it was purchased in 2010 by 3G Capital, an investment firm run by Brazilian billionaires. It has been selling more restaurants to franchisees to reduce overhead costs.
For the quarter, Burger King earned $68.2 million, or 19 cents per share. A year earlier it earned $6.6 million, or 2 cents per share.
Excluding certain items, earnings were 23 cents per share, above the 21 cents per share analysts expected.
Revenue declined 40 percent to $275.1 million, mostly because sold more restaurants to franchisees, so books less revenue from those locations. Wall Street expected $264.5 million. Stripping out the impact of the refranchising and foreign currency fluctuations, revenue rose 8.1 percent.
Global sales at restaurants open at least a year rose 0.9 percent. This figure is a key indicator because it strips out the effects of newly opened or closed locations. The strongest performance was in the Asia-Pacific region, which posted a 3.7 percent rise. Latin America and the Caribbean and Europe, the Middle East and Africa also reported improved results.
Burger King boosted its quarterly dividend by a penny to 7 cents per share. Its stock rose 5 percent to $20.73 in morning trading. So far this year, its shares have risen about 16 percent.
The company has more than 13,000 restaurants around the world.
(Copyright 2013 by The Associated Press. All Rights Reserved.)