Burger King Worldwide Reports Less Than Royal Results

Burger King Worldwide (NYSE: BKW  ) reported results that showed same-restaurant growth on par with its rivals McDonald's (NYSE: MCD  ) and Yum! Brands (NYSE: YUM  ) . There was little in the report that should have investors say "king me" as it blamed weak consumer spending like its larger competitors. However, expansion of its chain points to a bright future.

Results
Burger King Worldwide reported same-store sales growth of 0.9%, though total "systemwide" revenue was up 4.9%. Growth in the US and Canada for same-store sales was negative. Burger King blamed "...continued softness in consumer spending and ongoing competitive headwinds" for the lackluster same-store sales. Systemwide revenue is total sales of all restaurants, whether they are owned specifically by Burger King or franchises. The reason for this boost was simply the opening of 133 new restaurants.

Sales specifically for Burger King the company were down big, but earnings per share was also up big as the company continues to sell company-owned stores to franchisees. This led to a short-term bump in adjusted EPS, up 31.6% to $0.23. Burger King also boosted its dividend 14.3% to $0.07 per share. It's still a modest dividend yield of well under 2%, but a boost is always encouraging as it shows management has confidence in the future.

Outlook
Burger King launched a new product called SATISFRIES that it believes will help boost sales. SATISFRIES are a healthier alternative to regular fries. This may prove to be a good move compared to McDonald's pushing apple slices because, let's face it, most people come to these fast-food burger chains in part for French fries in the first place. If they wanted fruit, they wouldn't be there, they would go elsewhere.

Management offered a tidbit about SATISFRIES. The last week in September saw a spike in guest traffic. It plans to launch similar product ideas that are carefully planned and selected to create similar curious responses.

Burger King has been on an expansion rampage, opening 592 new restaurants in the trailing 12 months. This is on average nearly three new restaurants every two days. This has been the main driver of growth.

Competitors
As previously mentioned, McDonald's and Yum! Brands had similar same-restaurant results. This suggests the problem is not unique to Burger King. McDonald's reported same-store sales growth at 0.9%, exactly the same as Burger King. Similar to Burger King's concern, McDonald's blamed the situation on an "ongoing challenging environment." 

Yum! Brands posted flat same-store sales in the US, though it had mixed results in other parts of the world. Yum! Brands doesn't usually comment on the "macros", as it puts it, but it did say "...overall, the economies in emerging markets are slowed a little bit from what they were a year ago, but are still pretty healthy." Maybe it's a good thing Burger King has stayed focused on the franchise route and shifted the risk more to its franchisees.

Final foolish thoughts
This fool is in the King's court, despite the less than royal same-store sales and weak economic climate. While Burger King Worldwide's same-store sales are moving like a peasant, the hidden story here is the rapid growth within its franchisees resulting in rapid growth in EPS.

Overall success is a bit hidden from the market because it sees declining sales, not fully taking into account that each franchise provides less revenue to Burger King but more income. This is because it's basically a straight royalty check; quite fitting for the King. Follow the trend in restaurant openings going forward as this is the biggest driver of EPS growth for Burger King, and with it, the biggest driver of shareholder value.

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