U.S. News

Wendy's Earnings Fall Sharply Following Spinoff


Wendy's International reported a 90% drop in fourth-quarter net profit due to losses at the recently-sold Baja Fresh brand and costs for employee compensation and the burger chain's planned breakfast menu.

The company's shares fell more than 4% following the announcement as results came in well below analysts' estimates. Wendy's recovered some of its losses and finished down about 2% on the day.

Net income was $3 million, or 3 cents a share, compared with $30 million, or 25 cents a share, a year ago.

Income from continuing operations, after taxes, was 9 cents a share.

Excluding one-time charges and a tax benefit, Wendy's earned 6 cents a share, well below Wall Street's average estimate of 21 cents per share, according to Thomson Financial.

Total revenue fell 1.1% to $596.4 million.

Wendy's last month said sales at company-owned restaurants open at least 15 months, a key retail measure known as same-store sales, rose 3.1% in the fourth quarter, helped by demand for new Double Melt cheeseburgers.

At franchised Wendy's restaurants, same-store sales rose 2.7%.

Wendy's has relied on promotions like a 99-cent junior bacon cheeseburger and new products like the Double Melt cheeseburger to help it compete with bigger rivals McDonald'sand Burger King Holdings .

In the last year, the company has shed smaller brands like Tim Hortons and Baja Fresh Mexican Grill so it can concentrate on boosting performance at its flagship brand.

The strategy has started to pay off. Same-store sales have improved in the past three quarters after posting a drop of 4.8% in the first quarter of last year.

During the fourth quarter, Wendy's named interim Chief Executive Kerrii Anderson to that post permanently. Anderson had served as the company's chief financial officer and was named interim CEO after former chief Jack Schuessler resigned suddenly in April.