Burger King Holdings (BKC) stock has been anything but flame-broiled over the past year. Although we did see a juicy spike in BKC stock from March through mid-April along with the rest of the market, the shares have left investors with a bland taste in their mouths since the beginning of 2008. In the fast-food wars, the Big Kahuna still is McDonald’s (MCD) (see related article – 5 Reasons to Buy McDonald’s MCD Stock). So, should investors forget about BKC shares altogether and sell the stock? Here are five reasons to step away from the table and leave Burger King.
BKC shares are back down to earth. Technically speaking, BKC shares are in true bear territory. The chart here shows the stock now trades below both its short-term, 50-day moving average, as well as its long-term, 200-day moving average. The stock has a lot of overhead supply as well, making a breakout at this level a very tough slog going forward.
BKC stock earnings were poor
. On April 29, Burger King reported fiscal third-quarter earnings results showing profits sank 13% year-over-year. Burger King said it earned a profit of $41 million, or 30 cents a share in the quarter. BKC earnings were from $47 million or 34 cents a year earlier. Burger King sales revenue also was down in the quarter. Although the bottom-line number of 30 cents per share was a penny above the consensus estimate, revenue of $596.9 million fell short of the $598 million analysts predicted.
Burger King same store sales declining. The decline in profits and revenues came courtesy of a sharp drop in the all-important same-store sales metric, a measure of sales at locations open at least one year. Burger King’s same-store sales fell 3.7% in fiscal Q3, with very sharp declines in January and February in restaurants located in the U.S. and Canada. The results improved in March, but not enough to keep same-store sales out of the red for the quarter. In fact, North American same-store sales sank 6.1%.
BKC stock leaders blame the weather? The company attributed the same-store sales decline in North America to what it called the “severe U.S. weather conditions in January and February.” And while it’s true that those strong winter storms kept restaurant goers at home, the harsh weather didn’t stop rival McDonald’s from adding to their U.S. same-store sales during the same period.
Burger King also blaming unemployment. Another reason cited by Burger King for the weak quarterly same-store sales and revenue was “high levels of unemployment and underemployment.” According to Burger King CEO John Chidsey, the unemployment problem “will remain our industry’s biggest headwind.” While high unemployment may indeed be a headwind for the economy at large going forward, the employment picture didn’t stop rival McDonald’s stock from enjoying a blowout quarter or holding back MCD earnings.
We’ll see how Burger King did in terms of earnings when they report again on August 26, but if the recent trend is any indication of things to come, “The King” definitely is not the place to be.
