News

Wendy's/Arby's takes third quarter hit

November 11, 2010

Wendy's/Arby's Group reported results for its third quarter ended Oct. 3, which included a 4.7 percent decline in revenue.

Wendy's systemwide same-store sales were down 1.7 percent, and Arby's systemwide same-store sales took a 5.9 percent hit.

The company posted a loss of $900,000, compared to a profit of $14.7 million in 3Q 2009.

Roland Smith, president and CEO of WAG, said the results were "simply not satisfactory," and attributed the losses to slower sales and higher commodity costs.

Wendy's 3Q margins fell by approximately 200 basis points since 3Q 2009, excluding the impact of the chain's new breakfast advertising campaign, according to Smith, who also pointed out the brand still outperformed many quick-service peers during this timeframe.

Arby's margins dropped 170 basis points since 3Q 2009, however the brand's company-operated same-store sales increased 5.5 percent in October.

Third quarter highlights include:

• Consolidated revenues were $861.2 million as compared to third quarter 2009 revenues of $903.2 million.
• Net loss was $0.9 million, or $0.00 per share.
• Third quarter 2009 net income was $14.7 million, or $0.03 per share.
• Wendy's total revenue was $600.7 million compared to revenue of $613.6 million in the third quarter a year ago, a year-over-year decrease of $12.9 million.
• Wendy's North America systemwide same-store sales decreased 1.7 percent.
• Wendy's North America company-operated same-store sales decreased 3.1 percent and Wendy's North America franchise same-store sales decreased 1.3 percent.
• Arby's total revenue was $260.5 million compared to $289.6 million in the third quarter a year ago, a decrease of $29.1 million.
• Arby's North America systemwide same-store sales decreased 5.9 percent.
• Arby's North America company-operated same-store sales declined 9.5 percent and North America franchise same-store sales declined 4.1 percent.

The plan moving forward is to continue focusing on Wendy's 'Real' branding behind the new salad line, as well as promotion of the value menu. Also, the company heads into the fourth quarter with a boost from its new natural-cut french fries with sea salt.

"We believe (the french fries) will be the best quality french fries in the quick-service restaurant segment. We believe this major improvement to one of our core products will contribute to sustainable same-store sales growth," Smith said.

Wendy's is also testing a new premium cheeseburger line and and is planning to expand into breakfast, with a national roll-out in late 2011.

For Arby's, although the 3Q performance was weaker than expected, the brand has been buoyed a bit by its everday value menu. Arby's remains in the midst of a significant turnaround plan and Smith is optimistic about the chain's - and WAG's - continued improvement.

"We will not be satisfied until we are driving consistent and positive same-store sales. We continue to believe Wendy's/Arby's Group has significant long-term earnings growth potential," Smith said. "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."