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Wendy's First-Quarter Profit Tumbles 83%

wendys earnings
Gene J. Puskar/AP
By CANDICE CHOI and MICHELLE CHAPMAN

NEW YORK -- Wendy's is trying to reinvent itself as a purveyor of relatively higher-quality fast food. The problem is that its competitors are aggressively promoting deals and value menus and stealing away price-conscious customers.

Wendy's Co. (WEN), based in Dublin, Ohio, on Wednesday reported a first-quarter profit that met Wall Street expectations. But sales fell short of Wall Street's hopes. The company noted in a conference call with analysts that it had lost market share in the value category, which accounts for about 20 percent of the fast-food industry.

CEO Emil Brolick said Wendy's plans to adjust its marketing to emphasize the 99-cent portion of its revamped "Right Price, Right Size" value menu, which offers options ranging from 99 cents to around $2. The company had replaced its 99-cent menu in January to boost profit margins and give its franchisees more flexibility in pricing.


Brolick emphasized that the company's push to underscore the quality of its food remains a priority. The effort in part reflects the growing popularity of chains such as Chipotle Mexican Grill (CMG) and Panera Bread (PNRA), which offer food perceived to be of better quality and that commands higher prices.

But at a time when people are still being careful about their spending, Brolick added that Wendy's also needs to keep reminding people about its cheaper options.

"Because let's face it, there are a lot of other people who are," he said.

For the quarter, Wendy's said sales at established company-run stores in North America rose 1 percent, with higher prices offsetting a decline in transactions. The company said bad weather and shifts in the timing of the New Year and Easter holidays hurt its results.

At franchised stores, the metric edged up 0.6 percent. The figure is a key gauge of a restaurant operator's performance because it strips out the impact of newly opened and closed locations.

To recast itself to be more in line with fast-casual chains, Wendy's is also investing heavily in remodeling its restaurants to have a modern, inviting look. For example, the new layouts include cozier seating areas, flat-screen TVs and fireplaces.

The company said it had opened 86 new and remodeled restaurants as of April 30. It still expects to remodel half of its company-run restaurants by the end of 2015.

Wendy's has more than 6,500 locations, most of them in North America. In the U.S. and Canada, about 1,600 of them are company-run.

But Wendy's is undertaking an image makeover at a tough time for the restaurant industry, with companies fighting over every dollar. McDonald's (MCD) is touting its Dollar Menu and Burger King (BKW) is offering two sandwiches for $5 and Whopper Jr. burgers for $1.29.

For the period ended March 31, Wendy's earned $2.1 million, or a penny a share. That's down from $12.4 million, or 3 cents a share, a year earlier. Last year's quarter included an $18 million, or 5 cents a share, gain on the sale of an investment.

Excluding certain items, including remodeling costs, earnings in the latest quarter came to 3 cents a share, in line with Wall Street expectations.

Revenue rose 2 percent to $603.7 million versus a year ago but fell short of the $615 million forecast of analysts polled by FactSet.

Wendy's cited a refinancing benefit for raising its 2013 adjusted earnings outlook to 20 cents to 22 cents a share, up from 18 cents to 20 cents a share. Wall Street had predicted 19 cents a share.

Its shares fell 35 cents, or 5.6 percent, to $5.78 in afternoon trading Wednesday. They have traded in a 52-week range of $4.09 to $6.19.

(Updated at 2:26 p.m. ET)


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49 Comments

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John

Wendy's food tastes like cardboard. They need to improve the flavor and texture of thier buns and burgers they dropped the ball after Dave Thomas died.

May 10 2013 at 2:00 AM Report abuse rate up rate down Reply
commtranz

that Panera place is the country's biggest rip off any time i have HAD TO eat there i need eye glasses to find the meat in my sandwich and everything is gooey with mystery melted cheese. the last one i my state closed down last year and good riddens to it

May 09 2013 at 11:22 AM Report abuse rate up rate down Reply
Craig

Compare Mickey D's dollar menu to all the others, their hard to beat. A dollar for any size drink, I wouldn't drink Burger Kings coffee if it was free.

May 09 2013 at 11:11 AM Report abuse rate up rate down Reply
ELECTRODE

All these food joints (fast and slow) are gouging the customer! They advertise reasonable prices for the food, but when it comes to the beverage the price is ridiculous! $1.00 for the bargain burger and $1.75 for the beverage! Oh! you want water? Cost 75 cents for the cup! And in San Francisco, sorry no public restrooms. Mc. D's has $2.95 for a morning sausage and egg burger that would fit in a shoe polish can, with a hashbrown thing about the size of ritz cracker that cost another 75 cents. Oh! you want something to wash it down with? That cost extra. Not to mention the little condiment packets that require a pair of scissors to get em' open. Wonder when they will start wanting 25 cents each for those?

May 09 2013 at 10:53 AM Report abuse -1 rate up rate down Reply
1 reply to ELECTRODE's comment
Karl

Stop whining. Bring a bottle of water. It is better for you anyway. And a lot cheaper. You can't buy hamburger meat, cheese, a hamburuger bun, catchup, etc. for less than $3.00. It is a bargain. I bet you spend more on a pack of smokes or a drink at your local bar. Do you expect food to be free? You sound like you could not fight your way of of a wet paper bag.. And you have trouble opening a pack of ketchup... Really?

May 09 2013 at 11:17 AM Report abuse +1 rate up rate down Reply
charpist5

We ate at Wendy's a couple of weeks ago. Not only did the drivethrough people not put one of the burgers in the bag, necessitating another wait at the drive through line, but my burger was honestly so salty it tasted...worse than bad. Although I do love the Frostys, I don't plan to ever eat at Wendy's again. I actually commented from their website awhile back about another issue, but unlike other places, they did not bother to respond.

May 09 2013 at 10:49 AM Report abuse +1 rate up rate down Reply
hyperstan

I like McDonalds better. So there.

May 09 2013 at 10:16 AM Report abuse rate up rate down Reply
1 reply to hyperstan's comment
marcanagnos

Check the lawsuit, half of the "mcnuggets" are fillers and chemicals. It's like you're eating a piece of plastic, which tastes better than anything sold there.


MARC

May 09 2013 at 10:36 AM Report abuse -1 rate up rate down Reply
joeljoey5160

Chain fast food restaurants are usually over priced crap.

May 09 2013 at 9:35 AM Report abuse +1 rate up rate down Reply
1 reply to joeljoey5160's comment
marcanagnos

Prices getting higher and higher thanks to the fool in the WH.


MARC

May 09 2013 at 10:37 AM Report abuse rate up rate down Reply
patrick

ok wendys your hambuger sucks now oh and your fries do to

May 09 2013 at 7:56 AM Report abuse +2 rate up rate down Reply
1 reply to patrick's comment
marcanagnos

Not nearly as much as the other chains.


MARC

May 09 2013 at 10:38 AM Report abuse -1 rate up rate down Reply
peterb101

Wendys used to have THE best French Fries. They made them "better" a couple of years ago or so and they are horrible. Their taste is flat, and in the 10 minutes it takes me to get home, they are just limp and soggy. I now go to Wendys less and McD's more mostly because of their fries.
The drive thrus of all 3 Wendys in my area - 9 times out of ten, after I have paid, they ask me to move up, and a worker brings the food out to me. This is even when there is no one else on line. Why is this being done? Instead of having a worker run things outside, put them to work on the food line to get the orders made quicker.
Inside, the design of the signboards and cashier area are awkward and the decor feels 80's ish, and the feeling I get from the kitchen staff is they are always behind. Their burgers are great, if pricy, but worth it.

May 08 2013 at 11:42 PM Report abuse +1 rate up rate down Reply
1 reply to peterb101's comment
marcanagnos

If you have a location that's serving crap, on the back of the receipt there's a survey. If it's not on there, go to talktowendys and use the data on it. Tell them that the quality sucks, and management will explain it to them. They don't want owners ruining their reputation, I drive for a living and always fill it out. That's why Burger King started doing the same thing years ago, because with them it's a real craps shoot getting quality food.


MARC

May 09 2013 at 10:42 AM Report abuse -1 rate up rate down Reply
2 replies to marcanagnos's comment
Karl

Marc.. I bet that you are from N.Y or N.J. stop whining about everything. You can't buy the food and make it yourself any cheaper. It is a bargain. Is is a CONVENIENCE. Oh, btw
it is not the fault of the President for the price of a cheeseburger, a coke or the price of gas. It is called... Supply and Demand. Oh.. one more thing. The North East,. NY, NJ, Penn, Conn and on. voted for Obama.. the SOUTH did not.

May 09 2013 at 11:23 AM Report abuse +1 rate up rate down
John

Marc has to be a plant from Wewndy's.

May 10 2013 at 2:02 AM Report abuse rate up rate down
Warrior

Mandatory store remodeling needs to stop! The customer does not need it, could care less about how the restaurant looks in comparisson to the new designs; and, the customer winds up paying for it with higher prices. Customer Service is a disaster! 5 out of the last 7 times I went to Wendy's late at night; and, instead of receiving the #2 Double Classic Cheeseburger Combo, I got a chicken sandwich, instead...5 out of 7 times! I live in San Diego. Like many other fast food chains in a city with a population of 10% illegal immigrants, my local Wendy's seems to pick the ones that speak and understand "the least" to take orders. The ones that do speak and understand English are little better. They seem to think you want what ever the most popular promotion item is; or, whatever a lot of other people are ordering; or, what they personally like to eat themselves. That's management's fault for poor training and supervision if so many of their order takers have poor listening skills. People with poor listening skills and service skills in the fast food industry should be scrubbing trash cans and toilets, instead of taking orders!

May 08 2013 at 10:39 PM Report abuse +1 rate up rate down Reply
1 reply to Warrior's comment
marcanagnos

Take the survey at talktowendys and let them know. They are required to follow the rules or their franchise will be taken away.


MARC

May 09 2013 at 10:44 AM Report abuse -1 rate up rate down Reply