Sonic not shaken by competition

by Monica Watrous
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Sonic Drive-In
Sonic posted double-digit earnings growth for fiscal year, fourth quarter.

OKLAHOMA CITY — Sonic Corp. credits its diverse menu as a competitive advantage in the quick-service restaurant category. The drive-in chain, which delivered same-store sales growth of 4.9% for the fourth quarter and 7.3% for the year, aims to sustain strong momentum in the year ahead with new breakfast items, premium ice cream offerings and chicken products.

“More of our competitors play primarily at lunch and dinner with a narrow range of products,” said Cliff Hudson, chief executive officer of Sonic Corp., during an Oct. 19 earnings call with financial analysts. “But we have a five day part strategy and a diverse, differentiated product portfolio that allows a lot of runway for growth, and we continue to see significant opportunities in a variety of ways.”

Sonic posted positive sales growth across all day parts for the year and quarter, even as more competition emerged from other segments of the food service industry.

Cliff Hudson, Sonic
Cliff Hudson, c.e.o. of Sonic Corp.

“On the competitive landscape, it only gets more competitive,” Mr. Hudson said. “But when we look across the horizon, it’s not a whole lot different than it was 6, 12 months ago, and that is that fast-casual taking a good bit more of the food, convenience stores taking more of the snacking and the drinks…

“Our product pipeline’s working; our promotional strategy is working. But some major competitor is getting their act back together. I don’t know whether they will sustain it. And these other industry segments will be more competitive, I’m sure.”

For the fiscal year ended Aug. 31, Sonic had net income of $64,485,000, equal to $1.23 per share on the common stock, up 36% from net income of $47,916,000, or 87c per share, in fiscal 2014. Total revenues advanced nearly 10% to $606,089,000 from year-ago revenues of $552,349,000.

Fourth-quarter net income was $26,296,000, or 51c per share, up 40% from $18,825,000, or 35c per share, for the comparable quarter. Total revenues climbed 7% to $175,266,000 from $163,769,000.

For fiscal 2016, Sonic expects to drive same-store sales growth of 2% to 4% and earnings per share growth of 16% to 20%, up from the previous outlook of 14% to 18%, through product innovation and promotional, media and technology initiatives.
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