Wendy's Quarterly Net Trails Estimates on Lower Sales
Wendys International Inc., the U.S.
hamburger chain thats been seeking a buyer since April, said
fourth-quarter profit rose less than analysts estimated as sales
dropped at restaurants open at least 15 months.
Wendys fell 5 percent in New York trading as executives
said today that full-year profit may trail analysts projections
on higher costs for beef and chicken. The restaurant chain
didnt provide an update on a possible sale.
Sales at company-owned locations decreased for the first
time in seven quarters after Frescata deli-style sandwiches and
a new marketing campaign failed to lure customers. Wendys and
McDonalds Corp., which posted unchanged U.S. sales in December,
have struggled as consumers cut back on spending because of
gasoline prices near $3 a gallon and declining home values.
“The problem they face, and again now weve even seen it
in McDonalds numbers, is trying to get same-store sales up,
said Ron Paul, president of Chicago-based restaurant consultant
Technomic Inc. “A lot of the emphasis is going to be on lower-
priced value products, which is going to make it hard to get
store sales up.
Net income more than quadrupled to $14.1 million, or 16
cents a share, from $3.03 million, or 3 cents, a year earlier,
Dublin, Ohio-based Wendys said today in a statement. Revenue
declined less than 1 percent to $596 million
Earnings in 2008 before interest, taxes, depreciation and
amortization will be at the low end of analysts estimates that
range from $324 million to $358 million, Chief Financial Officer
Jay Fitzsimmons said on a call with analysts and investors.
“The first part of 2008 looks challenging due to economic
headwinds and rising commodity costs, Chief Executive Officer
Kerrii Anderson said on the call.
Share Performance
Wendys declined $1.25 to $23.93 at 4 p.m. in composite
trading on the New York Stock Exchange. The shares have dropped
28 percent in the past year through today.
“People are concerned about what the real value is, and
how difficult its going to be to really get Wendys back on
solid footing and grow it again, said Paul.
The restaurant company earned 21 cents a share, excluding
expenses to consider its strategic options. Lower salary and
restructuring costs, as well as a decrease in the tax rate,
helped boost profit. Wendys also increased prices as chicken
and paper expenses rose.
Seven analysts estimated average quarterly profit of 24
cents a share at Wendys. Four projected sales of $592.5
million.
Commodity Prices
“We continue to see commodity price increases in 2008,
which we plan to offset with menu price increases and further
costs reductions, Fitzsimmons said.
Wendys sees beef costs climbing 3 percent to 4 percent in
2008 and chicken costs rising 5 percent to 8 percent,
Fitzsimmons said.
McDonalds, the worlds largest restaurant company,
reported Jan. 28 that Decembers U.S. sales at restaurants open
at least 13 months were unchanged, the worst monthly performance
in almost five years. It blamed colder weather and sluggish
consumer spending. For the quarter, the maker of Big Macs said
same-store sales rose 3.3 percent.
“We are starting this year with a very low momentum in
sales, Fitzsimmons said.
Burger King
In contrast, Burger King Holdings Inc., the second-largest
U.S. hamburger chain, said last week that second-quarter profit
rose 29 percent as discount menus and late-night hours attracted
customers. The company introduced the fast-food industrys first
discount breakfast last year and extended store hours until
midnight or later at its U.S. restaurants.
Revenue slumped at Wendys following the death of founder
Dave Thomas in January 2002, with sales at older stores dropping
six quarters in a row before former CEO Jack Schuessler resigned
in April 2006. He was replaced by Anderson.
Wendys said in December that Chief Marketing Officer Ian
Rowden resigned and last week said that it was stopping its
“red wig advertising. A new marketing campaign, called
“Waaaay Better, will focus on the companys “quality food.
The company formed a committee in April to explore a sale
after billionaire investor Nelson Peltz urged management to
boost profit and reduce expenses. The company said last week
that its in the “final stages of the review.
Peltzs Trian Fund Management LP is the companys largest
shareholder, while his Triarc Cos., the owner of the Arbys
fast-food chain, has offered to buy Wendys.
U.S. same-store sales dropped 0.8 percent at company-owned
restaurants and climbed 0.2 percent at franchised outlets in the
quarter, Wendys said Jan. 4.
The number of Wendys restaurants fell to 6,645 as of Dec.
30, 2007, from 6,673 from a year earlier.
