Sonic Corp. announced results for its first fiscal quarter ended November 30.
Key highlights of the company’s first quarter of fiscal year 2017 included:
System same-store sales declined 2 percent, consisting of a 2 percent same-store sales decrease at franchise drive-ins and 2.4 percent decrease at company drive-ins.
Company drive-in margins declined by 150 basis points.
Fourteen new franchise drive-ins opened and 56 drive-ins were refranchised, and the company repurchased 2 million outstanding shares.
“Our first quarter results reflect a sluggish consumer landscape and exceptionally strong prior-year performance,” says Cliff Hudson, Sonic Corp. CEO. “Although the business faces even tougher sales and margin hurdles in the second fiscal quarter, we remain optimistic in our ability to show sequential same-store sales and profitability improvement beginning in the second half of fiscal 2017.
“Our unit growth, capital structure, refranchising and technology initiatives are performing well,” continues Hudson. “We refranchised 56 drive-ins during the quarter and remain confident that we will complete our targeted refranchising transactions prior to the end of the third fiscal quarter, leaving us with a more efficient, higher-margin portfolio of company-owned stores. We are also pleased to have repurchased 2 million shares in the first quarter of 2017, representing 4% of shares outstanding, while continuing to invest in the people, development and content that will drive our consumer-facing technology to the next level.”
Same-Store Sales
For the first quarter ended November 30, 2016, system same-store sales decreased 2 percent, which was comprised of a 2 percent same-store sales decline at franchise drive-ins and a decline of 2.4 percent at company drive-ins.
Fiscal Year 2017 Outlook
While the macroeconomic environment may impact results, the company continues to expect adjusted earnings per share for fiscal year 2017 to be in the range of down 7 percent to flat year over year. The outlook for fiscal 2017 anticipates the following elements:
2 to zero percent same-store sales for the system.
Royalty revenue growth from new unit development.
65 to 75 new franchise drive-in openings.
Drive-in-level margins of 16 to 17 percent, depending upon the timing of drive-in divestitures and the degree of same-store sales growth at company drive-ins;
Selling, general, and administrative expenses of approximately $84 million reflecting increased investment in human resources and technology to support brand initiatives.
Depreciation and amortization expense of $37.5 million to $38.5 million reflecting the divestiture of company drive-ins as previously announced.
Net interest expense of approximately $26.5 million to $27.5 million.
Capital expenditures of $40 million to $45 million reflecting ongoing investment into the company’s technology initiatives.
Free cash flow of approximately $60 million.
An income tax rate between 35 to 36 percent.
The planned use of the remaining $122 million share repurchase authorization across the fiscal year, inclusive of refranchising proceeds.
An expected quarterly cash dividend of $0.14 per share.
