Sonic shares decline after lower 4Q earnings

NEW YORK (AP) — Shares of Sonic Corp. declined Wednesday after the restaurant operator said a sharp decline in sales led to a lower fourth quarter profit as consumer discretionary spending continued to wane.

The stock slipped 90 cents, or 8.1 percent, to $10.27 in afternoon trading. The stock has ranged from $5.78 to $12.86 over the past year.

Sonic, which operates a chain of drive-in restaurants, on Tuesday said fiscal fourth-quarter profit fell 17 percent because of a 23 percent decline in revenue.

Sales at stores open more than a year — a key performance indicator — fell 4.5 percent during the quarter.

Many consumers have been scaling back on dining out, given a sluggish economy.

Wedbush Morgan analyst Rachael Rothman said that many restaurants have discounted menu items, while competition has increased for Sonic's core beverage business. Both these factors may hurt a near-term recovery in sales at stores open at least one year, Rothman said.

Rothman also questioned management's plans to open nearly 1,000 drive-in restaurants over the next year, given tight credit markets and poor industry fundamentals caused by the tough economy.

Rothman maintained an "Underperform" rating on the stock.

Meanwhile, Stifel Nicolaus analyst Steve West said that the company sold underperforming stores, and the cash should help pay down debt.

West reiterated a "Hold" rating.