Sonic Corp. seeking to overcome sales slump with menu innovation

by Monica Watrous
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Sonic Concretes
Sonic debuted its new Custard Concretes in late April.
 

OKLAHOMA CITY — Sonic Corp. hopes to revive sales this summer with new menu items, said J. Clifford Hudson, chairman, chief executive officer and president. Net income in the third quarter ended May 31 was $18,751,000, equal to 44c per share on the common stock, which was up from $15,353,000, or 32c per share, in the prior-year period. Excluding special items, net income declined 13%. Revenues totaled $123,990,000, down from $165,239,000. Same-store sales for the period declined 1.2%.

Cliff Hudson, Sonic
Cliff Hudson, chairman, c.e.o. of and president of Sonic

“You’re going to ask the question what are we doing to recapture the momentum in our business,” Mr. Hudson told investment analysts during a June 22 earnings call. “And we’re doing a number of things at refining the processes we’ve had in place in the recent past. We continue our reemphasis on pairing premium innovation, product innovation with relevant value.”

Recent examples of premium offerings include the return of Sonic’s Pretzel Dog, as well as new Custard Concretes and the Ultimate Chicken Club Sandwich. Value promotions include half-price milkshakes after 8 p.m. and half-price burgers on Tuesday nights, Mr. Hudson said.

Sonic Ultimate Chicken Club Sandwich and Pretzel Dog
Recent examples of premium offerings include the return of Sonic’s Pretzel Dog, as well as the new Ultimate Chicken Club Sandwich.
 

“And this approach does stand in contrast to what we were doing a year ago, which is more deeply discounted bundles, such as the Boom Box,” he said. “And while that product sold, it didn’t drive traffic and it did not … leverage our strengths, which historically have been more one of innovation, differentiation, talking to customers about customization of products and the high quality of products…

“Though our competitors’ promotional activity is still very aggressive, looking forward, we have begun to see a broadening of our competitors’ promotional activity to include not just discounting, but product innovation and new offerings. And our view is that this is really a necessary first step for a more rational competitive environment. And this recent showing in the rate of food deflation should also play in this direction in terms of reducing value-ordered promotions across the industry.”
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