Credit: Popeyes Louisiana Kitchen.
Popeyes Louisiana Kitchen (PLKI) couldn't live up to analysts' second-quarter expectations, and shares were getting punished to the tune of 10% in Wednesday's after-hours trading. But that certainly doesn't mean the fried-chicken specialist's results were undercooked.
On one hand -- and similar to Popeyes' technically mixed results three months ago -- the company announced that second-quarter revenue rose a modest 10.6% year over year, falling just short of consensus estimates for revenue of $62.9 million. On the other hand, adjusted earnings climbed 10.9% over the same period to $10.2 million, and 12.8% on a per-share basis to $0.44 to match analysts' expectations. Note that Popeyes also repurchased 260,207 shares of common stock during the quarter for roughly $15 million.
"Popeyes' robust second-quarter results demonstrate our focused execution against the five pillars of our strategic road map," reiterated Popeyes CEO Cheryl Bachelder. "Looking forward, we believe there is a long runway for continued growth of Popeyes, both in the U.S. and around the globe."
A delicious (operating) recipe
For reference, Popeyes management revised its pillar-centric operating model earlier this year to include these points: "create memorable experiences," "build a distinctive brand," "grow restaurant profits," "accelerate 'quality' restaurant openings," and "develop servant leaders." All of those are admirable goals in Popeyes' quest for operational excellence.
It seems to be working so far. Alhough part of Popeyes' growth can be chalked up to new locations, including 31 net restaurant openings during the quarter, global same-store sales also accelerated to 7.5% in Q2, compared with 3.6% this time last year. Within that figure, international same-store sales rose 4.3%, compared with 2.2% in last year's second quarter. And domestic same-store sales climbed an even better 7.9%, compared with a 3.8% increase in the same year-ago period.
This also marks Popeyes' 29th consecutive quarter with domestic same-store sales outpacing the broader chicken quick-service restaurant segment, and its 15th straight quarter of beating the overall QSR segment. What's more, Popeyes continues to gain ground on the competition (i.e., Yum! Brands' larger KFC concept), increasing its share of the domestic chicken-QSR market from 23.1% to 25.4% over the past year.
Looking forward
Finally, Popeyes reiterated 2015 guidance for net restaurant openings of 115 to 150, which will increase the size of its system base roughly 5%. The vast majority of these locations will be franchises, with only three to five new company-owned locations slated for the year. Popeyes also continues to expect general and administrative expenses at around 2.9% of systemwide sales, capital expenditures of $15 million to $20 million, and an income tax rate of roughly 38%.
Meanwhile, Popeyes increased its guidance for same-store sales growth in the range of 4.5% to 5.5%, up from its previous expected range of 3.5% to 4.5%. For the second time this year, Popeyes also modestly raised both ends of its previous adjusted earnings guidance by a penny per share, resulting in a new per-share earnings range of $1.85 to $1.90. Last but not least, Popeyes now expects to dedicate $50 million to $60 million to share repurchases in 2015, up from its old range of $40 million to $50 million.
As it turns out, however, analysts were already anticipating full-year net income of $1.91 per share, above the high end of Popeyes' guidance range. To be fair, this is eerily reminiscent of Wall Street's overzealous full-year forecast last quarter, which incidentally didn't result in a subsequent plunge in share price. But with shares of Popeyes Louisiana Kitchen currently trading at a rich 33.5 times trailing 12-month earnings, and 26 times next year's estimates, it's evident the market was hoping for a more substantial raise.
