News

Wendy's/Arby's Group earnings continue to fall

August 11, 2010

Sales at Wendy's/Arby's Group, Inc. continued to decline in the second quarter, however the company remains optimistic that its turnaround efforts are taking hold. 

The second quarter results, announced today, saw earnings fall to $10.7 million, or 3 cents a share, from $14.9 million, or 3 cents a share, in the second quarter of 2009. The second quarter period ended July 4.

Not all news was bad, however, as the company achieved 3.2 percent growth in adjusted EBITDA. Factors in this growth include the reduction of general/administrative expenses and the expansion of Wendy's company-oriented restaurant margin.

Roland Smith, President and Chief Executive Officer of Wendy’s/Arby’s Group, said: “We generated this growth despite ongoing challenges in the U.S. economy, particularly the high unemployment rate. We continue to invest in our long-term growth opportunities including Wendy’s breakfast program, remodeling restaurants, and international development.” 

Earlier this week, WAG announced development plans intoRussiaand theEastern Caribbean.

Overall, consolidated revenues decreased from $912.7 million in 2009 to $877 million this year. Net income was also down, at $10.7 million compared to $14.9 million in 2Q 2009.

The Wendy's brand summary for 2Q 2010 includes the following results:

• Wendy’s total revenue was $607.4 million compared to revenue of $615.2 million in the second quarter a year ago, a year-over-year decrease of $7.8 million due primarily to the decline in company same-store sales.
• Wendy’s North America systemwide same-store sales decreased 1.7 percent.
• Wendy’s North America company-operated same-store sales decreased 2.9 percent, and Wendy’s North America franchise same-store sales decreased 1.4 percent.
• Wendy’s company-operated restaurant margin was 16.4 percent, compared to 15.9 percent in the second quarter 2009, an increase of 50 basis points.  This year-over-year improvement was offset in part by sales deleveraging as well as unfavorable commodity costs.  

“We were pleased to expand restaurant margins to 16.4 percent, despite soft same-store sales and a 90 basis point increase in commodity costs. Second quarter same-store sales were impacted by the weak economic environment and continued aggressive value promotions by QSR competitors,” said Smith. “We are excited about our new lineup of premium salads and other new products. Sales improved significantly since the start of national advertising for our new salads, and we anticipate third quarter same-store sales will be positive."

The Arby's brand summary for 2Q 2010 includes the following results:

• Arby’s total revenue was $269.6 million compared to $297.5 million in the second quarter a year ago, a decrease of $27.9 million, which was primarily due to declines in same-store sales and 18 fewer company-operated restaurants.
• Arby's North America systemwide same-store sales decreased 7.4 percent.
• Arby’s North America company-operated same-store sales declined 8.8 percent and North America franchise same-store sales declined 6.7 percent.
• Arby’s company-operated restaurant margin was 13.4 percent, compared to 14.9 percent in the second quarter 2009. The year-over-year difference was due to sales deleveraging and unfavorable commodity costs, partially offset by advertising costs that were deferred until the second half of the year. 

“During the second quarter, we achieved flat comparable transactions versus a year ago, which is encouraging compared to trends over the past year,” said Smith. “It will take time to turn same-store sales positive. Our July North America company-operated same-store sales improved after we started national advertising for our new $1 value menu sandwich.  We continue to make progress on our key priorities at Arby’s, under the leadership of our new President Hala Moddelmog. We are revitalizing product innovation, executing on our three-year remodel program, and validating and reintroducing our brand positioning to the consumer."