(Update with analyst comment, adds detail.)
By Paul Ziobro
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Burger King Holdings Inc.'s (BKC) fiscal first-quarter earnings fell 3.2% as high unemployment among the chain's core customers led to declining same-store sales.
Burger King's results fell below Wall Street expectations, in one of the toughest operating environments in memory for the fast-food industry. Global same-store sales fell 2.9% in the latest quarter, including a 4.6% decline in the U.S. and Canada.
"We are clearly not where we want to be as it relates to comparable sales and overall profitability," said Chairman and Chief Executive John Chidsey.
Shares fell 3.1% premarket to $16.75, and have lost nearly 30% this year, the worst performer among large restaurant companies.
Burger King's sales woes have been amplified by a price war in the fast food space, as competitors bid for a shrinking pool of customers. After battling with some franchise owners, Burger King last week began selling its $1 double cheeseburger nationwide, though analysts say the chain needs a big boost in traffic to make up for lost margins. In a tug-of-war for market share, getting customers in the door is key.
"We're hopeful that traffic trends continue to improve as they increase the level of discounting," Telsey Advisory Group analyst Tom Forte said.
The chain has been struggling to strike the right price focus 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.
McDonald's has been gobbling up market share, albeit for a smaller pie, as customers eat out less. However, even McDonald's expects little, if any, growth this month.
For the quarter ended Sept. 30, Burger King reported a profit of $46.6 million, or 34 cents a share, down 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 same-store sales rising 1% in the region encompassing Europe, the Middle East, Africa and Asia Pacific and 4.6% in Latin America.
Analysts polled by Thomson Reuters most recently forecast earnings of 37 cents on revenue of $653 million.
Global restaurant margins improved to 13% from 12.6% on lower costs for food, paper and other goods.
Burger King mostly held its fiscal 2010 guidance in tact but said it expected general and administrative expenses at the high end of its range. It also now expects 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.)