Morgan Stanley: Sonic's Long-Term Story 'Intact'

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Sonic's
SONC
management team including its CFO and Treasurer presented at a Morgan Stanley Global Consumer Conference earlier this week which impressed analysts. The analyst, John Glass, noted that Sonic's long-term story is “intact” given marketing and menu improvements which will soon be complimented with new technology, including mobile and loyalty initiatives. Glass notes that the company has come a long way since fiscal 2012 when the company reallocated marketing spend to national advertising, brought back its “two-guys” advertising theme and hired a new head of culinary development as well as a new Chief Marketing Officer. “This culminated in consistent comp momentum,” Glass wrote. The analyst is now stating that the company has momentum for the next “leg to the investment story” which is unit growth. Sonic's management plans to open 1,000 new stores over the next 10 years, ramping two percent to three percent gross unit growth over time. However, Glass notes that in the near-term, investments by the company will “mute” development, but management remains confident in accelerating unit growth given strong trends in new franchise development commitments and four years of positive comps, improved restaurant margins and lower investment costs. Shares are Equal-weight rated with a $24 price target.
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Posted In: NewsJohn Glasssonic
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