Popeyes Louisiana Kitchen, Inc. Cooks Up a Solid Quarter

Image source: Popeyes Louisiana Kitchen, Inc.

Shares of Popeyes Louisiana Kitchen (PLKI) fell more than 5% after the market close on Wednesday when the company released fiscal first quarter 2016 results. But the fast-food chain insists its long-term ambitions are still on track. Let's take a closer look at how Popeyes kicked off its latest fiscal year:

Popeyes Louisiana Kitchen results: The raw numbers

Data source: Popeyes Louisiana Kitchen. 

What happened with Popeyes Louisiana Kitchen this quarter (and in 2015)?

• Global same-store sales rose 1.6%, including:
• Domestic same-store sales growth of 1.1%, marking Popeyes' 21st straight quarter of positive domestic same-store sales growth.
• International same-store sales growth of 6.2%, marking its 27th consecutive quarter of positive international comps.
• Popeyes' domestic market share of the chicken-QSR segment rose to 26.3%, up from 24.6% in the same year-ago period, and 25.5% in fiscal 2015.
• Adjusted earnings were also flat at $0.58 per share.
• Sales from company-owned restaurants were $34.6 million, down slightly from $34.7 million in last year's first quarter.
• Company-owned restaurant operating profit was $7 million, or 20.2% of revenue, down from $7.5 million, or 21.6% of revenue last year, as favorable chicken and grocery basket costs were more than offset by higher labor costs, and lower revenue and operating profit in new markets.
• Opened 44 restaurants during the quarter, including 19 domestic and 25 international locations.
• Net restaurant openings were 25, leaving Popeyes' with a total of 2,569 company-operated and franchised locations at quarter's end, up 6.2% over the past year.
• Generated free cash flow of $16.8 million, down from $17.7 million in the same year-ago period.
• Repurchased 554,086 shares of common stock during the quarter for $30 million, or an average cost of roughly $54.14 per share.

What management had to say 

Popeyes CEO Cheryl Bachelder stated:

We are on track to deliver our 2016 full year guidance and we are confident in our future outlook as we make progress against our new, next generation Strategic Roadmap. We reported global same-store sales of 1.6% and earnings per diluted share of $0.58 during the first quarter, which was in line with our expectations. Despite the very promotional QSR landscape, our guests continue to value our quality food and innovative new product offerings and respond well to selective promotions of our core products. We are excited about our future as we begin executing our key strategies, which will help us to achieve our long term growth goals.

Looking forward

To be fair, Popeyes didn't provide specific quarterly guidance three months ago. And for perspective, its now-reiterated full fiscal-year 2016 guidance calls for same-store sales growth of 2% to 3%, net new restaurant openings of 140 to 185 (or year-over-year growth of 6% to 7%), share repurchases of $80 million to $120 million (roughly $60 million funded by operating cash flow, and up to $60 million from additional borrowings), and adjusted earnings per diluted share in the range of $2.10 to $2.15. The latter range represents bottom-line growth of 10% to 13% over last year, which is below Popeyes' long-term goal of maintaining adjusted EPS growth of 13% to 15%. But as Popeyes management explained last quarter, that relative shortfall comes primarily as the company plans to make around $2 million in incremental investments toward supporting its long-term strategic goals.

In the end, though the market's initial reaction seems to indicate Wall Street wanted more from Popeyes Louisiana Kitchen, I think investors should be pleased the company effectively delivered as promised. As Popeyes continues to execute against its strategic vision and take market share in this increasingly competitive quick-service restaurant segment, I think it should emerge a stronger company for it -- and one better positioned to drive market-beating returns going forward.