October 29, 2012 5:53 pm

Burger King earnings fall despite revamp

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Burger King, the US fast- food chain, reported a steep drop in its third-quarter earnings Monday as its refranchising efforts ate into revenues.

Net income at Burger King fell 83.3 per cent to $6m, or 2 cents a share, as revenues declined by 25.8 per cent to $451.1m. The results were better than Wall Street analysts predicted, and the company’s same-store sales rose.

Burger King’s revenues fell because it has been selling off company-owned restaurants to franchise owners. The company, which went public this year, overhauled its marketing strategy and is putting more effort into overseas expansion.

“We completed our first full quarter as a public company with continued positive momentum despite the challenging global economic environment,” said Bernardo Hees, chief executive.

Burger King’s new approach comes at a challenging time for the US fast-food industry. McDonald’s and Chipotle this month reported quarterly results that were disappointing, blaming weakened consumer demand.

According to a recent survey from Consumer Edge Research, low and middle-income consumers are being hurt by high petrol prices, while fears about the US “fiscal cliff” of looming tax rises and government spending cuts are holding back spending.

Jeffrey Bernstein, restaurant analyst at Barclays, said the results were a sign that Burger King’s marketing efforts and revamped menu were working.

The industry has also become more competitive, with “better burger” chains stealing market share from the traditional hamburger giants. Yum Brands, which operates KFC, Pizza Hut and Taco Bell, has been refocusing investment into the US.

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