iNVEZZ.com, Tuesday, October 29th: Shares of US fast-food chain operator Burger King Worldwide Inc (NYSE:BKW) jumped yesterday as the company reported robust growth in Q3 earnings, exceeding market expectations. The company’s net profit for the three months to end-September soared to $68.2 million (£42.4 million), or $0.19 per share, from $6.6 million, or $0.02 per share, for the same period last year, with costs slashed by 64 percent. The stock closed yesterday on the NYSE at $20.90, up 5.77 percent from the previous close.
Burger King reported that its total operating costs dropped to $129.6 million in Q3 from $361.9 million for the same period last year, mainly thanks to the sale of 519 restaurants to franchisees during the past 12 months. The refranchising initiative also resulted in a 39.6 percent y/y decline in total revenues, to $275.1 million, but excluding the impact of refranchising and currency movements, revenue rose 8.1 percent y/y, reflecting net restaurant growth and an increase in comparable sales.
Global same-store sales grew 0.9 percent y/y in Q3, slowing from a 1.4 percent rise in Q3 2012, as improved performance in the Europe, Middle East and Africa (EMEA) and the Asia Pacific (APAC) regions was offset by a decline in sales in the US and Canada due to subdued consumer sentiment and tight competition, as well as by softer sales growth in Latin America and the Caribbean (LAC. System-wide sales climbed by 4.9 percent y/y, thanks to 592 net restaurant openings during the last year, up 118 percent y/y.
Earnings-wise, the company announced organic growth of 16.7 percent in adjusted EBITDA (excluding the impact of refranchising and currency movements) to $176 million, with all four regions recording double-digit growth rates. Adjusted EBITDA margins widened to 64 percent from 35.7 percent a year earlier as the company’s refranchising and cost cutting efforts led to a $5.6 million year-on-year decrease in management, general and administrative costs.
!m[Refranchising initiative helps cut costs by 64% while same-store sales rise 0.9%](/uploads/story/6407/thumbs/pic1_inline.jpg)
In the accompanying statement, Chief Executive Officer Daniel Schwartz drew attention to the launch in the US and Canada of ‘Satisfries’, a lower-fat variety of French fries, in a bid to lead innovation. Schwarz shared his belief that similar new products coupled with continuous efforts to improve operations would enhance the customer experience and drive increased restaurant profitability. “Our positive momentum continued in the third quarter, as we delivered double-digit organic EBITDA growth and industry best-in-class margins […] we expect to finish 2013 strong.”
Burger King is the third biggest hamburger chain in the US after McDonalds (NYSE:MCD) and Wendy’s (NASDAQ:WEN). Last week McDonald’s predicted flat same-store sales for the fourth quarter, citing economic conditions which remain challenging and have contributed to disappointing sales performances for four straight quarters.
**On October 28 buy Burger King shares at $13.14.**
**On October 28 sell Burger King shares at $20.90.**