UPDATE 4-Burger King profit tops Street, shares rise

Thu Apr 29, 2010 12:41pm EDT

* Q3 EPS 30 cents vs Street view 29 cents

* Q3 revenue slips 0.5 pct to $596.9 mln

* North America same-restaurant sales down 6.1 pct

* Burger King shares up 3.6 percent (Rewrites first paragraph to include sales trends; adds menu moves, outlook for same-restaurant sales; updates shares)

By Lisa Baertlein

LOS ANGELES, April 29 (Reuters) - Burger King Holdings Inc BKC.N said sales trends were improving in a bumpy economic recovery and posted quarterly profit that edged past Wall Street estimates, sending its shares up 3.3 percent.

The second-biggest U.S. hamburger chain after McDonald's Corp (MCD.N) was hit hard by severe weather in the central and eastern United States during the first three months of the year. Once weather conditions improved, restaurant traffic did as well, it said.

Chief Executive John Chidsey said U.S. same-store sales increased in March and were slightly better in April, though still down from a year earlier.

Executives expect worldwide same-store sales in the current fiscal fourth quarter to improve from the third quarter, but they remained guardedly optimistic due to the bumpy economic recovery.

"High levels of unemployment and underemployment will remain our industry's biggest headwind," Chidsey said.

On Thursday, new data showed U.S. jobless claims fell slightly less than expected, suggesting the labor market was only improving gradually. [ID:nN29243362]

Burger King is still feeling the pinch of shifting to more low-price menu items such as a limited-time $1 Double Cheeseburger, $1 BK Breakfast Muffin Sandwiches and Buck Double hamburgers.

That strategic move makes Burger King more competitive with McDonald's, but it has lowered its customers' average purchase in dollar terms versus a year ago when such menu items were not available.

Still, the company is expecting a boost from its roll-out of Starbucks Corp's (SBUX.O) Seattle's Best Coffee this summer and tie-ins in the fourth quarter with the summer films "Iron Man 2" and "The Twilight Saga: Eclipse".

SALES, PROFITS SLIP

Worldwide sales at restaurants open at least 13 months were down 3.7 percent for the fiscal third quarter that ended March 31, driven by a 6.1 percent decline in the United States and Canada.

Over the same period, McDonald's global sales at established restaurants were up 4.2 percent, and up 1.5 percent in the United States. [ID:nN21173035]

Burger King, known as the home of the Whopper, had net income of $41 million, or 30 cents a share, for its fiscal third quarter. That was down from $47.1 million, or 34 cents a share, a year earlier.

Robert W. Baird analyst David Tarantino said Burger King's per-share profit in the latest quarter was a penny better than consensus and 3 cents better than his own estimate. Other analysts confirmed the company's 1-cent beat.

Tarantino said in a client note that March same-store sales were down 2 percent in the United States and Canada -- far better than a more than 8 percent drop for January through February -- driven by sales of the company's higher-priced and higher-profit "premium" Steakhouse XT burgers and better weather.

Revenue fell 0.5 percent to $596.9 million.

Globally, restaurant margins fell 0.4 percentage points to 11.3 percent, with lower food, paper and product costs mitigating the effect of the sales drop.

Bernstein Research analyst Sara Senatore noted that margins at U.S. & Canadian company-owned restaurants had a margin of 12.9 percent, better than her estimate by 202 basis points.

The company, which operates about 12,000 restaurants worldwide, said it opened 37 net new restaurants during the quarter. About 90 percent of Burger King locations are run by independent franchisees.

Shares of Burger King were up 74 cents to $21.43 in early afternoon trade. (Additional reporting by Phil Wahba in New York; Editing by Maureen Bavdek and Tim Dobbyn)

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