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Nathan’s Famous profits fall, despite rise in sales

Hot dogs and fries on a stainless steel

Hot dogs and fries on a stainless steel counter on Saturday, May 14, 2016, at Nathan's Famous in Oceanside, which has been open about a year. Nathan's Famous restaurants are celebrating their 100th anniversary this year. Photo Credit: Chuck Fadely

Nathan’s Famous Inc. sales increased but its net income fell sharply in its latest fiscal year, as it began making hefty debt payments, the company reported Friday.

The Jericho-based hot dog maker reported its profits declined by nearly 48 percent, to about $6.1 million for the fiscal year that ended March 27.

Its interest expense rose to $14.6 million, from $816,000 the previous year. The increase is due to the company’s issuing $135 million in bonds in March 2015, at an interest rate of 10 percent. Nathan’s took on the debt to pay a $25-per-share special, one-time dividend to investors.

Nathan’s reported that revenue grew by 1.8 percent year over year, to $100.9 million in the latest fiscal year. Its income from operations posted a 25 percent annual gain, to nearly $25 million.

The company’s stock closed up almost 4 percent, to $44.40.

The company earned $19.8 million in license royalties from retail sales in the 2016 fiscal year, up 10 percent from a year before. Nathan’s gave much of the credit to its 2014 agreement with John Morrell & Co., a division of food industry giant Smithfield Foods, which is now manufacturing, selling and marketing Nathan’s franks.

Nathan’s has seen “significant” growth in sales of packaged hot dogs “as a result of more effective sales, marketing and promotional strategies,” the company said in a news release.

Earnings per diluted share fell to $1.37 in the 2016 fiscal year, from $2.55 for the previous year.

Nathan’s chief executive Eric Gatoff said the company’s retail and food services sales and its company-owned restaurants “all delivered outstanding results,” helping Nathan’s achieve its highest-ever income from operations.

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