With the taste of last quarter's solid performance still fresh on investors' palates, Popeyes Louisiana Kitchen (NASDAQ:PLKI) just served up another plate of mixed quarterly results. But this time, the quick-service restaurant chain added a little extra kick with its guidance.
Quarterly revenue climbed roughly 11% year over year to $54.9 million, helped by 44 net restaurant openings in Q3 and impressive 7.3% global same-store sales growth. For perspective, the latter includes 8.3% growth internationally and 7.2% domestically, and marks a notable improvement over last quarter's domestic and international SSS growth of 3.8% and 2.2%, respectively. As it stands, Popeyes' domestic same-store-sales growth has also outflown the broader chicken QSR segment for 26 consecutive quarters, and the overall QSR segment for 12 consecutive quarters. Popeyes' market share in chicken-QSR also climbed by 2.5 percentage points over the same year-ago period to 23.7%.
Meanwhile, operating EBITDA climbed by 13% to $57.9 million, and free cash flow rose 7.8% to $35.9 million. Adjusted earnings per share increased 10.5% to $0.42, aided in part by Popeyes' decision to repurchase 247,741 shares of common stock for roughly $10 million during the quarter -- that's good for an average price around $40.37 per share. So far this year, Popeyes has bought back and retired 709,700 shares for roughly $30 million, or an average price around $42.27 per share.
Analysts, on average, were looking for slightly lower earnings of $0.41 per share on higher revenue of $55.5 million.
"The sustainability of our performance is a reflection of our principles, priorities and processes," said Popeyes CEO Cheryl Bachelder. "As we look ahead, we are excited about this new era for Popeyes -- an innovative menu, beautifully remodeled restaurants, an expanding global footprint, and a renewed focus on our employees and guests."
Don't put your fork down yet
Rather than reiterating earnings guidance as it did three months ago, Popeyes also now expects same-store sales growth of 5% to 5.5% for the full year, compared with its previous guidance of 3% to 4%.
Popeyes also raised the top and bottom ends of its expected 2014 EPS range by $0.03 and $0.01, respectively, resulting in a new range of $1.61 to $1.64. Then again, Wall Street was already expecting 2014 earnings of $1.62 per share, or near the high end of Popeyes' old range. To be fair, though, and given Popeyes' 2013 earnings of $1.43 per share, that represents the low end of management's long-term guidance for 13% to 15% growth in diluted earnings per share.
But not everything in Popeyes' guidance increased. General and administrative expenses are now expected to be around $78 million to $79 million, or 2.9% of systemwide sales and a decrease from 3% last quarter. Capital expenditures should also remain steady at $30 million to $35 million.
What's more, Popeyes stated that share repurchases will remain at $30 million for the year, indicating that their buyback efforts won't continue into the fourth quarter. With shares up more than 20% over the past three months as of this writing, that might well turn out to be a prudent move. Finally, Popeyes reiterated expectations for net new openings of 100 to 130 locations this year, including 10 to 15 company-owned restaurants and good for system growth of 5%.
In the end, I'll admit there was nothing jaw-dropping about the report. But at the same time -- apart from Popeyes' small top-line miss -- this was another undoubtedly solid performance underscored by steady revenue and earnings growth, healthy same-store sales, continued market share gains, and the likely smart conclusion of their share repurchase program. In the end, that's all good news for patient investors as Popeyes methodically delivers on its long-term promises.