Wendy's/Arby's posts loss during difficult quarter

by Eric Schroeder
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ATLANTA — Wendy’s/Arby’s Group sustained a loss of $909,000 on sales of $765,988,000 during the third quarter ended Oct. 3, results the company’s top executive deemed “simply not satisfactory.”

The loss of $909,000 compared with net income of $14,688,000, equal to 3c per share on the common stock, in the same period a year ago. At $765,988,000, net sales in the quarter were down 5% from $806,038,000 in the same quarter of fiscal 2009.

“These third-quarter results are simply not satisfactory to us,” said Roland Smith, president and chief executive officer. “We will not be satisfied until we are driving consistent and positive same-store sales, capturing the operating leverage inherent in the business and growing free cash flow. We continue to believe Wendy’s/Arby’s Group has significant long-term earnings growth potential.

“In addition to developing more high quality, differentiated menu items at both brands, we will use our balance sheet strength to expand the breakfast daypart at Wendy’s, continue our remodeling program at both brands and significantly grow our international presence.”

Total revenue for Wendy’s during the quarter was $600.7 million, down 2% from $613.6 million during the same quarter of the previous year.

Mr. Smith said Wendy’s attempted to reinforce its “real” quality and value proposition during the third quarter with the launch of four new entree salads and 99c promotions. The company is building on that strategy with the announcement earlier this week that it is adding all-new, natural cut, skin-on french fries with sea salt.

“We believe this major improvement to one of our core products will contribute to sustainable same-store sales growth,” he said. “We have also developed an exciting new premium cheeseburger line that is being tested this quarter. In addition, Wendy’s is planning to leverage its existing restaurant base by expanding into breakfast. Initial results from breakfast test markets are encouraging, and we are moving toward a national roll-out beginning in late 2011.”

Revenue for Arby’s during the quarter was $260.5 million, down from $289.6 million during the same quarter of the previous year.

Despite weaker results at Arby’s, Mr. Smith said the brand has built momentum and delivered 5.5% company-operated same-store sales growth in October, reflecting the success of its everyday value menu.

For the nine months ended Oct. 3, net income for Wendy’s/Arby’s Group was $6,433,000, or 1c per share, down 66% from $18,656,000, or 4c per share, in the same period of fiscal 2009. Net sales were $2,575,682,000, down 4% from $2,679,892,000.
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