Primary Insights– BKC Sales Trends

Based on our “primary insights,” or “grass roots” proprietary research, which included a survey of various Burger King restaurant managers/employees, BKC’s U.S. solid top-line trends appear to have continued in September. Fifty percent of the respondents said they are experiencing better sales trends in September relative to August. About 33% of the restaurants surveyed said trends are stable with the month prior while 17% said sales have slowed sequentially. The two most cited drivers of improved trends were increased coupons/promotions and improved customer service. The former reason is somewhat concerning as same-store sales grew 5.5% at BKC’s U.S. and Canada segment in 4Q08, but margins still declined 230 bps (net of the reimaging program). Please refer to my post from September 28 for more “primary insights” details regarding recent discounting at BKC. Stable to slowing sales trends were attributed primarily to kids returning to school/vacation is over and the slowing economy.

BKC does not provide monthly sales data so we don’t know what trends were in August, but on its August 21 earnings call, management stated that July was a positive month and that it was confident BKC will continue to deliver quarterly consecutive positive comp performance throughout FY09. Management also stated that in 1Q09, however, the company is lapping 1Q08’s U.S. comparable sales growth of 6.8% (U.S. and Canada up 6.6%), its best quarter since the beginning of BKC’s turnaround in 2004. On average, the restaurants surveyed are seeing a 4.4% lift in same-store sales in September, which is somewhat slowed from the past two quarters of 5%-plus growth, but still a strong number relative to the comparison from 1Q08.



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