Burger King (NYSE: BKC), a famous fast-food joint that competes with McDonald's (NYSE: MCD), Yum! Brands (NYSE: YUM), and Wendy's/Arby's Group (NYSE: WEN), reported earnings for the fiscal second quarter on Thursday. Net sales decreased 3%, and net income dipped 8% to $0.33 per diluted share. The call was for $0.37 per share.
It's good to be the King, but it's not good to miss your earnings forecast. Yes, we shouldn't always pay attention to the analysts and their game, and it's certainly difficult these days to make forecasts anyway, but it's always nice to see a company at least hit the ballpark in terms of consensus.
The press release cited concerns with currency translations, so that's something for shareholders to keep in mind. But the release also cited something that I think is one of the best elements of the Burger King story: its marketing campaigns. Management was happy to congratulate itself on being highlighted by trade journal Ad Week. I know, it's just corporate bragging in an earnings document, who needs that, right? While that may be true, I do honestly believe that Burger King's TV spots have definitely built a loyal following among the valuable youthful demos, and that the campaigns, which have included that creepy royal mascot, are indeed responsible for growth. And those Whopper Virgins commercials were pretty funny, too.
So, while the quarter wasn't a great one, I do think Burger King has what it takes to market its way through the economic mess. I hope it doesn't cut too much capital in promoting its brand, especially since the company can advertise for cheaper rates considering the recession. I would assume Burger King would be able to get more bang for the marketing buck. It'll need to keep its edgy brand equity at a high level to ensure that comps continue to grow. They did well this past quarter, growing 2.9% on a worldwide basis. I think Burger King is a long-term buy, but I would expect the stock to be somewhat weak in the short term.
Disclosure: I don't own any company mentioned; positions can change at any time.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
