Popeyes Lousiana Kitchen Inc. is planning to strike a better balance between core menu value offers and new product introductions as the chain navigates a stubbornly value-conscious environment expected to last at least through Election Day, company officials said in a conference call with analysts on Wednesday.
Cheryl Bachelder, CEO of the Atlanta-based chain, said the operating environment produced softer than expected sales in the second quarter and a reduced same-store sales forecast for the remainder of the fiscal year.
“The headline is we remain in a very value oriented environment, despite a reasonably good situation on gas prices and unemployment,” Bachelder said. “The customer seems less confident in the future than we’d like them to be. And so value was very operative in the second quarter, and we’re assuming that continues through the year.”
She said the 2,600-unit Popeyes has made adjustments to its third and fourth quarter calendars “to stay on top of that value expectation of our customers,” with an eye on a balance between value offers and new products. During the second quarter Popeyes introduced three limited-time offers (Southern Fair Chicken, Magnolia Blossom Chicken and Boneless Wings) and two one-week promotions — a $5 favorites offer and the boneless wings introduction at a $5 price.
“We do not want to move to a year-round core menu value — we don’t think that’s healthy for the brand in the long term,” she said, “so balance is our planning principle.”
While acknowledging a strong customer response to these offers — their contribution to the mix of sales in the quarter was the highest ever, Bachelder said — they were not driving incremental sales, which she said was a function of reduced traffic sector-wide.
Bachelder attributed the sector weakness to consumer confidence that was “stable but not robust,” as well as to a “wear-out factor” coming with the increase in value promotions. Finally, she said decreasing grocery prices were reducing eating out overall.
“I feel comfortable that our franchises are doing their best to stay competitive in their marketplace. What I'm not satisfied with this the sector trends,” she said. “I think the sector needs to improve. The consumer needs to be eating out more often in general for all of us to prosper. So, I think we're okay on pricing but I'd sure like to see more vitality in the sector on traffic.”
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