Despite what Sonic Corp. executives said were late-summer glitches in its rollout of a new point of sale system, the drive-in operator reported increases in profit and same-store sales for its fourth quarter.
Oklahoma City-based Sonic reported Tuesday that profit rose 54.3 percent in the Aug. 31-ended fourth quarter, increasing to $18.8 million, or 34 cents a share, from $12.2 million, or 21 cents a share, in the same period last year. Revenues rose 3.1 percent, to $163.8 million from $158.8 million in the prior-year quarter.
Systemwide same-store sales increased 4.6 percent, with franchise drive-ins up 4.5 percent and company-owned units up 4.9 percent.
“We experienced some challenges with our new POS system that began occurring in late August, and they continued through mid-October,” said Steve Vaughn, Sonic’s chief financial officer, in a conference call with analysts. “We now have these issues addressed, but did see some impact to sales growth at our company drive-ins during this time period.”
Lynne Collier, an analyst with Sterne Agee, said in a note the glitches in the POS and “point of personalized service,” or POPS, initiative were delaying the rollout of the systems to franchises by two to three months.
“We anticipate that the franchise rollout will take place over a three-year period,” Collier wrote.
Vaughn assured analysts that the POS difficulties should not affect its same-store sales growth for 2015. Collier said she was modeling a blended same-store sales growth estimate for both company and franchise units of 3.3 percent in the first quarter, which ends in November.
Clifford Hudson, Sonic’s president and chief executive, said the POS/POPS problems have been ironed out and the company will be offering the system first to franchisees in areas where it has company-owned units.
Hudson said the problems were in the software and started in August, which was the month Sonic had targeted for full rollout to its company locations.
“It took us six or eight weeks to get that worked out,” Hudson said. “And as that was occurring, it did have a negative impact on sales and service with our customers. We believe we have worked through that.”
He said correcting the glitches was a “very arduous process,” that involved Sonic’s internal team and the company’s vendors. Hudson added that the POPS system now incorporates suggestive selling and eventually will include customer engagement both on the drive-in lots and off.
Hudson said the POPS operation features will “evolve over time” and may include smartphone applications as well.
The on-property point of personal service platform will eventually work in tandem with smartphone mobile apps, Hudson said, and “should allow us to engage the customer differently and serve them differently. They will be differentiated for the Sonic brand.”
While the company finishes work on the POS and POPS challenges, Nicole Miller Regan, an analyst with Piper Jaffray, said she expected company-owned same-store sales performance would be below that of franchisees in the first quarter.
However, Regan said she expected Sonic’s same-store sales to accelerate “throughout the year as its technology rollouts had the opportunity to take hold.”
Sonic ended the quarter with 3,518 drive-ins nationwide, with 391 company-owned and 3,127 franchised.
Contact Ron Ruggless at [email protected].
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