(Adds details from conference call.)
By Paul Ziobro
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Burger King Holdings Inc. (BKC) said early results from a deeply discounted double cheeseburger have matched the performance of test markets, but a sales rebound will need a rosier consumer attitude and improving job market.
Burger King on Thursday reported a fiscal first-quarter profit decline of 3.2% amid a tough environment in the fast-food industry where high unemployment is hurting sales across the sector. Burger King cited worsening joblessness among its target "Super Fan" demographic that dines at fast-food burger chains nine times or more a month for a 4.6% same-store sales decline in the U.S. and Canada.
Amplifying the sales woe is a competitive price environment in fast-food as chains vie for a shrinking pool of customers.
Burger King last week started selling its double cheeseburger for $1 nationwide, slicing the price from the usual $1.89 to $2.39. While still early in the roll-out, Burger King says company-owned stores performed in-line with stores that tested the discount over the last 18 months or so, which margins declining less than anticipated. Traffic got a boost from the deal, but the company would not specify how much is needed to break even.
"I remain cautiously optimistic but I also remain realistic," Burger King Chairman and Chief Executive John Chidsey said Thursday on the company's earnings call.
Burger King is still forecasting "soft" same store sales through the end of the calendar year, and says it needs consumers to start feeling better about spending before same-store sales improve.
"We realize that reigniting sales growth will likely remain difficult until both consumer sentiment and unemployment levels improve globally," Chidsey said.
Burger King shares were down 13 cents, or 0.8%, in recent trading, at $17.16, as its results missed analysts' expectations. First-quarter profit fell to $46.6 million, or 34 cents a share, from $50 million, or 36 cents, a year earlier. The latest period included a two cents charge due to currency translation, while the prior year included acquisition-related costs of 2 cents.
Revenue decreased 5% to $636.9 million, with global same-store sales down 2.9%, including a 1% increase in the region encompassing Europe, the Middle East, Africa and Asia Pacific and a 4.6% decline in Latin America.
Analysts polled by Thomson Reuters most recently forecast earnings of 37 cents on revenue of $653 million.
Burger King has been struggling to strike the right balance on price this year after failing to step into the value game soon enough.
At the same-time, fast-food players are rolling out premium products, with McDonald's Corp. (MCD) and Wendy's, of Wendy's/Arby's Group Inc. (WEN), both recently launching new burgers. Burger King plans its premium push starting earlier next year with the national launch of its "Steakhouse XT" burger in February.
Lower costs for food, paper and other items helpd Burger King improve global restaurant margins to 13% from 12.6% amid the sales decline. The chain also maintained most of its fiscal 2010 guidance. It sees general and administrative expenses at the high end of its range and also expets the weak U.S. dollar to provide an overall boost to earnings.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com
(Tess Stynes contributed to this article.)