NEW YORK ( TheStreet) -- Sonic ( SONC) has been a success story in the ultra-competitive burger business over the past year, but may soon confront a different environment as rival McDonald's (MCD) attempts to turn around sluggish sales.
"McDonald's is the 800-pound gorilla; when their business is off, it benefits the rest of us," said Sonic chairman, president and CEO Clifford Hudson in an interview. And boy has McDonald's business been off.
The Golden Arches U.S. same-restaurant sales fell 2.6% in the first quarter as it continued to battle negative public perceptions of its fast food and overcome operational missteps, such as having an overstuffed menu that led to delays in getting items to customers.
Last year alone, McDonald's saw a 2.1% drop in same-restaurant sales, with guest traffic falling a disturbing 4.1%. On the other hand, Sonic reported back in March that its fiscal second-quarter same-store sales rose 11.5% as customers continued to respond to the ability to customize their burgers, as well as Sonic's creative menu items. The chain will report its latest financial results on June 22.
Over the past year, Sonic's shares have gained 42.2% compared to a 4.8% decline for McDonald's.
The prolonged sluggishness sales at McDonald's has sent its new CEO Steve Easterbrook off to orchestrate a series of initiatives to turn things around. Easterbrook says he wants to transform McDonald's into a "modern, progressive burger company."
That has meant a recommitment by McDonald's to making sure its Big Macs and French fries are served hot, and very quickly. Easterbrook has also sought to put more power into the hands of McDonald's franchisees, encouraging them to be ambitious on the menu to better meet their client's flavor preferences.