Atlanta-based AFC Enterprises, the operator and franchiser of about 2,000 Popeyes restaurants, reported a decline in second-quarter profits. But after accounting for an income tax refund last year, earnings actually rose, and the company's CEO said that is the more important measure.
Still, the company's shares plummeted Thursday after the earnings announcement Wednesday night. Shares were down more than 12 percent Thursday afternoon.
Reported profits fell to $5.5 million, 22 cents per share, down from $6.8 million or 26 cents per share in the same period last year. Revenue rose 2.9 percent to $35.3 million in the second quarter.
Without the effect of the one-time income tax adjustment last year, earnings per share would have risen to 23 cents from 21 cents in the same period a year ago.
Popeyes raised prices on selected items to offset higher food costs, which rose about 9 percent in the second quarter. On a global basis, sales at established Popeyes restaurants rose 0.7 percent, slightly faster than the 0.6 percent increase last year.
"Our customer is still under a lot of pressure," chief executive Cheryl Bachelder said. "Unemployment is still high. Gas is still high. This is a much more cautious economy than we all hoped it would be. It's a dogfight for the customer right now."
In the U.S., where Popeyes has about 80 percent of its restaurants, sales at restaurants open a year or more rose 0.5 percent compared to a 0.4 percent increase in 2010. The company said that it outpaced the chicken fast-food category for the 13th consecutive quarter.
"Despite a choppy economy and higher commodity costs, Popeyes continues to gain market share among its competitors," Bachelder said.
Sales at established restaurants in international markets rose 2.3 percent, but that was slower than in the same period a year ago. Popeyes this week named Andrew Skehan, a former Wendy's/Arby's executive, as the new chief operating officer for its international business.
The company is trying to improve the experience of its guests. By the end of the second quarter, about 65 percent of its U.S. restaurants reported drive-through times of 180 seconds or less. A higher percentage of guests say they are "delighted" with the service at Popeyes.
"I'm really proud of our system," Bachelder said.
Popeyes and its franchisees are opening restaurants at a faster pace this year. It has posted 23 net openings in 2011, after accounting for closures, compared to five net openings in the same period of the prior year.
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