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Cost Savings Boost Wendy's Profit

Wendy's International, which is looking to possibly sell itself, posted a lower-than-expected quarterly profit Monday despite cost savings, sending its shares down more than 3 percent in early trading.

Wendy's
AP
Wendy's

Net profit at the Dublin, Ohio-based fast-food chain was $14.1 million, or 16 cents per share, compared with $3 million, or 3 cents per share, a year earlier.

But excluding restructuring and other charges, it earned $18.4 million, or 21 cents a share, while analysts' expected 23 cents a share on that basis, according to Reuters Estimates.

Late last month, Wendy's said the committee examining its options, including a possible sale or recapitalization, said it believed it was in the final stages of its review process.

The review has taken longer than expected "primarily due to the continuing turmoil in the financial markets," the company said.

Weak credit markets have also cast doubt on whether Wendy's would be able to find a buyer. Analysts, on the other hand, are concerned that the process has distracted management.

In the quarter that ended Dec. 30, total quarterly sales fell slightly to $596 million.

Same-store sales at its U.S. franchise restaurants rose 0.2 percent, while at its company-owned outlets, same-store sales slipped 0.8 percent, both down from the prior-year period as reported earlier.

The company saved nearly $20 million in costs as it tightened its general, administrative and operating expenses.

Wendy's began the new year with its 99-cent Stack Attack double cheeseburger to compete with McDonald's Corp's $1 double cheeseburger.

In recent years, Wendy's has struggled to match McDonald's strength. But even the latter's December same-store sales fell to its lowest monthly level in nearly five years, worrying investors that consumers had begun cutting spending at cheaper and traditionally recession-resistant fast-food restaurants.

Wendy's, which is trying to revive same-store sales and profit growth in 2008, said it would focus on restaurant operations and advertising as part of that effort. On Monday, the company will launch a new ad campaign.

The company also announced a quarterly dividend of 12.5 cents a share for shareholders of record as of Feb. 14.

Wendy's shares were down 3.22 percent, or 81 cents, at $24.37 in early New York Stock Exchange trading.

Its shares have shed nearly a quarter of their value in the last 12 months. In the same period, McDonald's stock rose about 22 percent and Burger King Holdings rose more than 31 percent.

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