More Sector Gloom: Sales Dive At Drive-in Chain Sonic Corporation (NASDAQ:SONC)


The doom and gloom in earnings numbers, and bankruptcies, are now familiar occurrences in the beleaguered US restaurant industry. No surprise then that the Sonic Corporation (NASDAQ:SONC) stock fell steeply after the drive-in chain reported a sales miss for its fourth quarter, and issued dour guidance for fiscal 2017.

Shares plunged 16.65% to end Tuesday at $22.08 on volume of 11.35 million, over ten times the average volume of 1.11 million shares.

Technically, on SONC’s monthly chart, trouble was there for all to see. The stock made a classic double top – a high in March 2015 and then again in April 2016. The decline from the second top has taken the stock down through the $22.82 line –which has alternately been a strong resistance, as well as support, over the past two years.

Clearly, more downside can be expected.

Sonic Corporation (NASDAQ:SONC) earnings for Q4

Sonic reported sales of $162.12 million, down 7.5% year on year, and missing estimates by $5.03 million.

However, on the EPS front, which was $0.45, it beat by $0.01. Investors chose to ignore that, however, and griped more on the decline of 2% overall in same-store sales (and 3% at company owned stores), as well as the margin hit at company owned stores – down by 210 bps.

“Slowing consumer trends that began in April, however, persisted through the fourth quarter, resulting in lower-than-expected sales and profits in the fourth fiscal quarter,” said Cliff Hudson, Sonic Corp. CEO.

Sonic Corporation (NASDAQ:SONC) in 2017

For 2017 the company expects same stores sales growth of (-)2% to 0%, while drive in margins could dip to the range 16% – 17%.

Adjusted EPS could be in the range of down 7% to flat year on year.

“While our unit growth, capital structure and refranchising initiatives are performing well, low commodity costs, resulting in an aggressive promotional and pricing environment, are expected to continue to pressure sales and earnings in fiscal year 2017, particularly in the first half of the year,” said Hudson.


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