Drive-in burger chain operator Sonic (NASDAQ:SONC) came into the end of the 2006 fiscal year with nice momentum, as its previous quarter saw solid top-line and comparable same-store sales performance. The company's fourth quarter maintained the juiciness.
Total revenues for the period increased 11% to $693.3 million. Much of this growth was driven by the opening of new drive-ins -- Sonic opened a net 49 company-owned units and a net 100 franchised units in FY 2006. Management stated in the earnings conference call that it plans to accelerate expansion efforts in FY 2007, estimating that it will open 180 to 200 sites. The recent success of many of these sites launched in new markets like Spokane, Wash., has management very excited.
Beyond new store development, sales from those units opened for more than a year were also solid in the fourth quarter, with comps up 4%. Fueling traffic are new product offerings. We've seen the benefit of maintaining a fresh and relevant menu with Ruby Tuesday (NYSE:RI) and Jack in the Box (NYSE:JBX). Sonic may very well be the king of newness, consistently offering new desserts and sandwiches for customers. Over the summer, new yumminess came in the form of a hot and spicy jalapeno sandwich that could be cooled off with a chilly cheesecake shake.
In addition to new products, Sonic's PAYS program is contributing to comps growth; PAYS essentially puts a credit card terminal at each drive-in slot. We know the benefits of increasing credit card usage from other fast-food operators like McDonald's (NYSE:MCD) and Steak n Shake (NYSE:SNS). Likewise, Sonic is significantly benefiting from increased credit card usage, as revenues from this transaction type now represent roughly 25% of sales. Management stated in the call that this figure is showing no signs of slowing down.
Not only is Sonic seeing an increase in transactions from credit card users, their average ticket price is also higher than that of the traditional cash carrier. The average check for credit card users is $7, roughly 40% higher than the $5 average check for cash users. Let that be a lesson to all of us: If we want to lose weight, leave the credit card at home.
The market is driving down Sonic's stock in recent trading, but I would attribute much of this sell-off to the fact that the market bid up the price of shares just prior to the earnings release. From my vantage point, I see little here to fret over. Sonic will continue to see steady growth from new unit openings as well as fresh product offerings.
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Fool contributor Jeremy MacNealy has no financial interest in any company mentioned. The Fool's disclosure policy is made fresh on the premises.
