Burger King warns of sales drop, names new CEO

Candice Choi, AP Food Industry Writer

NEW YORK (AP) -- Burger King warned Thursday that sales are expected to drop 1.5 percent in the first quarter but noted that the figure turned positive toward the end of the period as it retooled its strategy to focus on value.

The Miami-based chain also announced a succession plan that will take effect once CEO Bernardo Hees moves on to take the helm at H.J. Heinz Co. later this year. The fast-food chain said Chief Financial Officer Daniel Schwartz, who is 32, will take over for Hees and named him chief operating officer in the meantime.

Hees and Schwartz are both partners at 3G Capital, the firm that bought Burger King in 2010. The management shuffle comes as the firm installs Hees into the same role at Heinz, which it's buying with Warren Buffett's Berkshire Hathaway.

Burger King Worldwide Inc. said the drop in sales at established restaurants for the quarter includes a 3 percent decline in North America. The chain attributed the decline to the challenging economy and heightened competition. It also noted that it was up against tough comparisons from a year ago.

Burger King noted that sales were negative early in the quarter but turned positive in March as it focused on offering value deals such as a Whopper Jr. for $1.29 and two sandwiches for $5.

"In January and February, we were more focused on premium products," noted Josh Kobza, who is taking over for Schwartz as chief financial officer.

Kobza, who previously served as senior vice president of global finance, noted that competitors at the time were pushing more deals and touting them heavily in ads.

Although he didn't specify any competitors, McDonald's has been underscoring its Dollar Menu for the past several months and Wendy's recently revamped its value menu to focus on expanded choices.

Going forward, Kobza said Burger King will continue to pursue a more "balanced approach" of playing up premium and value offerings.

For the period ended March 31, Burger King says adjusted earnings are expected to be 17 cents per share, an increase of 45 percent from the previous year. Analysts had expected 16 cents, according to FactSet.

The company also declared a dividend of 6 cents per share, a 20 percent increase from the previous 5 cents per share.

Shares of Burger King rose 4 percent to $19.20 Thursday.

Since taking over at Burger King, Hees has slashed costs, revamped the chain's menu and focused on international expansion. But the chain is trying to orchestrate a turnaround at a challenging time, when people have many more choices and are being more careful about where they spend their money.

In an interview, Schwartz noted that Burger King has "so much more to accomplish" in North America as well as on the international front. The chain has about 13,000 locations globally.