Analysts: Sonic same-store sales preview 'encouraging'

Sonic Corp. estimated Monday that systemwide same-store sales for the fiscal third quarter rose 2.8 percent.

Sonic’s preview of sales for the third quarter, which ended May 31, included an estimated increase of 3.7 percent at company owned drive-ins and 2.7 percent at franchised drive-ins.

Analysts at global investment banking and asset management firm William Blair said the quarter’s preview is a positive sign for Sonic, which had been performing below the quick-service market average.

"Sonic’s comp trends have underperformed the broader QSR market over much of the past year," wrote William Blair analyst Sharon Zackfia in a note. "This could be the first encouraging sign that trends are now keeping pace with the broader space, given new advertising creative and a new promotional strategy emphasizing multiple products across multiple dayparts, both of which appear to be benefiting results.”

New menu items and promotions helped drive sales in the quarter, according to the William Blair team.

“New menu items introduced during the quarter performed well, including popcorn chicken and sweet potato tots, while an ice cream promotion in May (half price shakes after 8 p.m.) helped drive sales in what had been the weak evening daypart,” the team's note said. “As a result, our conversations with management indicate that May was the strongest month of the quarter, in part because May was the easiest comparison.”

Oklahoma City-based Sonic said that on a two-year basis, estimated systemwide same-store sales improved by 6.7 percent in the third quarter.

“This one-year and two-year improvement in same-store sales reflects the effective impact our service, product quality and marketing initiatives have had on our business,” Clifford Hudson, Sonic’s chairman and chief executive, said in a statement.

“We are very pleased with the sales trends we saw in the third quarter, despite economic and some restaurant-level cost challenges,” Hudson added. “We remain confident in our ability to drive consistent sales and leverage other aspects of our multi-layered growth strategy in the near and long term.”

The William Blair analysts said the third quarter’s sales “could be an early sign of a fundamental inflection in the company’s sales trends.

“However, given a few head fakes over the past few years, we are going to stay on the sidelines pending the sustainability of trends into the highly profitable August quarter,” they said, adding that they were reiterating their “market perform” rating.

Sonic owns and franchises more than 3,500 drive-ins.

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