Stronger Burger King Goes After McDonald’s
Wendy's held the No. 2 fast-food burger spot in America for years, but a shift in the rankings is shaking up the entire industry and putting the top chain on notice.
For years, Wendy’s (NASDAQ: WEN | WEN Price Prediction) was the No. 2 fast-food hamburger chain in the US. Burger King was No. 3. Recent earnings show that those positions have reversed, and the leader, McDonald’s (NYSE: MCD), has a rival that is growing faster than it is.
Earnings show that Wendy’s same-store sales have dropped six quarters in a row. At the same time, Burger King’s sales have risen for five quarters. (Burger King is part of Restaurant Brands International (NYSE: QSR).)
Burger King’s increase in same-store sales in the second quarter was 8.3%. Wendy’s dropped 7% for the period. (Wendy’s did particularly poorly in the US, where same-store sales fell 8.2%.) Bob Wright, Wendy’s CEO, did not have much of an excuse: “Our traffic, our value proposition, and franchisee economics are not meeting our expectations.” He went on to lay out why the drop could be arrested.
McDonald’s comparable store sales rose only 1.3% in the most recent quarter. Burger King has a long way to go to beat McDonald’s, but that does not mean it cannot take away market share.
Wendy’s stock has taken an awful beating in the last year. It is down 27% in the last year, while the S&P 500 is 21% higher. At the same time, Restaurant Brands International’s stock is up 14%. (McDonald’s is down 10%.)
McDonald’s revenue was $7 billion in the most recent quarter. Restaurant Brands International’s was $2.5 billion. So, again, the race is for market share, and once again it appears that Burger King is gaining.
What is at stake? It may be that the race ends up as one for net income and net income in ratio to revenue. Restaurant Brands International had net income of $665 million in the second quarter. McDonald’s was $2.86 billion.
Do investors look at same-store sales and net income more than revenue? If so, Burger King’s case as the more successful company is at least plausible.
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
