Wendy’s/Arby’s Group reports lower 2Q profit on weak sales at restaurants

Thursday, August 12, 2010

Wendy’s/Arby’s Group 2Q net income falls

CHICAGO — Slipping sales and one-time charges cut into second-quarter results at Wendy’s/Arby’s Group Inc., the fast-food chain said Thursday, announcing its net income fell by more than a quarter.

At the same time, the owner of Wendy’s and Arby’s cut its full-year outlook, predicting that business at its hamburger chain and its roast beef chain would slow.

For the quarter that ended in late June, Wendy’s/Arby’s earned $10.7 million, or 3 cents per share. That’s down from last year’s net income of $14.9 million, or 3 cents per share.

Excluding one-time charges, earnings in the most recent quarter were 6 cents per share. The company had fewer shares outstanding during the period.

Revenue slipped 4 percent to $877 million.

Analysts expect the Atlanta company to earn 5 cents per share on revenue of $887 million for the quarter that ended in June. Those estimates typically exclude one-time items.

The country’s soured economy, with still-high unemployment and poor consumer confidence, continued to weigh on the two chains during the quarter.

“That’s going to continue to weigh on people’s ability to spend money eating out,” said Morningstar analyst Joscelyn McKay. “Consumer spending is very tight. Consumer confidence is low. It’s a perfect storm.”

To combat the sluggish sales, both chains are promoting their value meals and combos hoping to attract customers who are continue to scrimp when they eat out.

“They’re doing the right things by focusing on the value menu,” McKay said. “Although it hurts profitability, they really need to drive customers traffic at this point.”

At Wendy’s, the company’s larger chain, revenue slipped about 1.3 percent to $607 million. And sales from locations open at least a year — a key industry performance measure — dipped 1.7 percent.

That was far better than the results at Arby’s, the company’s smaller brand known for its roast beef sandwiches, milkshakes and curly fries.

There, revenue fell 9.4 percent to $269.6 million and sales from stores open at least a year sank 7.4 percent. Despite those results, the figures were an improvement from the first quarter, when sales from locations open at least a year skidded 11.6 percent at Arby’s.

Wendy’s/Arby’s said it expects its full-year earnings before interest, taxes, depreciation and amortization, to fall between 3 and 5 percent for the year. It had previously forecast growth in the “low to mid single-digits.”

The company said it now expects flat sales at established Wendy’s, down from its earlier forecast of an increase in the figure. It continues to expect negative sales from Arby’s locations open at least a year, but said the figure is expected to improve compared with last year.

Wendy’s/Arby’s shares fell 1 cent to $4.14.

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