February 15, 2013 / 1:15 PM / 7 years ago

UPDATE 2-Burger King profit boosted by cost cuts, new food

* Operating costs and expenses plummet

* Company plans to keep rolling out new menu items

* Sees 2013 inflation of around 3 percent

* Shares up almost 3 percent

By Lisa Baertlein

Feb 15 (Reuters) - Burger King Worldwide Inc, the third-largest U.S. hamburger chain, on Friday posted higher-than-expected quarterly profit, helped by cost cuts and new holiday sweets, premium sandwiches and special deals that boosted restaurant sales in the United States and Canada.

Total fourth-quarter operating costs and expenses plunged more than 40 percent to $292.6 million as the fast-food company spent less on everything from food and packaging to payroll and rents.

At the same time, Burger King tempted diners with gingerbread milkshakes, chicken parmesan sandwiches and a 55th anniversary Whopper hamburger deal.

The results landed as Burger King and fast-food rivals including McDonald’s Corp and Wendy’s Co fight hard for customers, who reeled in spending after the U.S. payroll tax increase in January cut take-home pay.

“We did see the environment become a little more challenging with consumers having a little less disposable income, weather conditions being a little bit worse and competition focused a little bit more on value,” Burger King Chief Financial Officer Daniel Schwartz told Reuters.

Burger King has been broadening its appeal, especially among women and health-conscious consumers, with a barrage of new menu items and the company will keep it up, Schwartz said.

While McDonald’s takes advantage of its massive size to negotiate better deals for everything from national advertising to beef, smaller chains like Burger King and Wendy’s can be more agile when it comes to shaking up menus to whet diners’ appetites.

Burger King on Friday reiterated its plans to use a mix of low-price and premium foods to drive profitable traffic to its restaurants.

During the fourth quarter, Burger King’s Whopper anniversary deal offered customers who bought one full-price Whopper a second for 55 cents. A new limited-time deal offers Whopper Jr sandwiches for $1.29 - 40 cents less than the suggested retail price.

The company that recently introduced $1 Cinnabon Minibon Rolls also is switching to a new brew from Starbucks Corp’s Seattle’s Best Coffee brand and debuting a lineup of high-margin coffee drinks, including “cafe-quality” lattes.


The Miami-based chain said fourth-quarter net income nearly doubled to $48.6 million, or 14 cents per share.

On an adjusted basis, Burger King earned 23 cents per share. Analysts on average were expecting profit of 15 cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell 30 percent to $404.5 million, but beat analysts’ estimates of $375.31 million. Excluding the impact of unfavorable foreign exchange rates and sales of restaurants to franchisees, the company said revenue grew 5.6 percent.

Overall sales at established restaurants increased an expected 2.7 percent, helped by a 3.7 percent gain at U.S. and Canadian restaurants open at least 13 months.

During 2012, Burger King renovated about 600 restaurants in the United States and Canada. It also added more field managers to assist franchisees.

Burger King forecast 2013 inflation of around 3 percent on the expectation that rising beef costs will be balanced by muted or falling prices for potatoes, cooking oil and paper packaging.

The earnings report from Burger King landed as it and other companies with European operations grapple with a scandal involving horsemeat in products labeled as beef.

Burger King said traces of horse DNA were found in samples of hamburger patties from a food-processing plant in Ireland but that the meat never reached its restaurants.

The company returned to public ownership in June 2012, less than two years after it was taken private in a $3.26 billion sale to Brazilian investment fund 3G Capital Management LLC, which is known for slashing expenses at the companies it buys.

The company’s shares were up 2.6 percent at $17.01 in afternoon trade on the New York Stock Exchange.

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