Atlanta-based Popeyes Louisiana Kitchen weathered a dramatic spike in food costs in the first quarter, posting larger sales and profits.
Higher corn and soy prices affected the cost of bone-in chicken for Popeyes, and the prices of flour and cooking oil also rose. Some Popeyes restaurants responded by raising prices on drinks or side items and keeping a tight handle on labor costs.
Popeyes now expects food costs to rise 4 to 5 percent this year, about twice as much as it had predicted. But the company said some of the costs would be offset by larger sales and cost savings in the supply chain.
Popeyes said sales at its established restaurants outpaced the chicken fast-food category for the 12th consecutive quarter, and grew faster than the overall fast-food market for the fourth straight quarter.
The company, which has almost 2,000 restaurants worldwide, earned $7.2 million or 28 cents per share, compared with $5.8 million or 23 cents per share last year. Total revenue was $46.8 million, up nearly 7 percent from $43.8 million in the same period last year.
The company's shares rose 49 cents or 3.3 percent in trading Thursday. The stock has risen 55 percent in the past year.
Popeyes got off to a slow start in January and February because of bad weather and lower spending on advertising. But limited-time offerings such as the Butterfly Shrimp Tackle Box and heavier television advertising kicked sales into a higher gear.
"It's easier to hunker down than to launch national advertising," said Chief Executive Cheryl Bachelder.
In the U.S., sales at restaurants open at least a year rose 3.9 percent, compared with a 0.4 percent decrease in the first quarter of 2010. International sales rose 4.1 percent, more than three times faster than last year.
Popeyes added 18 net new restaurants in the first quarter, and it is offering more incentives to encourage franchisees to open more restaurants in the U.S. Meanwhile, the company said it has improved customer service. Drive-through times have dropped in the past two years, and more guests report being "delighted."
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