Wendy's Earnings Top Expectations, To Sell 425 Stores

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NEW YORK -- Wendy's reported a quarterly net income that came in above Wall Street expectations and said it is selling 425 of its restaurants to franchisees, a move that's expected to help boost its profit margins.

Fast-food companies typically own only a small percentage of their restaurants. This helps keep their operating costs in check and gives them a more stable stream of income that's tilted toward royalty fees and rent, rather sales at restaurants.

Wendy's (WEN), based in Dublin, Ohio, also raised its dividend by 25 percent to 5 cents a share. Its stock shot up 9 percent to $7.29 in early trading on Wall Street.

CEO Emil Brolick said in a statement that the sale of the restaurants will also help expand adoption of the company's new restaurant designs. That's because Wendy's plans to sell the restaurants to "well-capitalized" franchisees willing to pay for the remodeling.

The sleeker new look is part of Wendy's push to try to distance itself from the greasy, cheap image of traditional fast-food chains. By cleaning up its stores and offering more premium burgers and sandwiches, Wendy's is hoping to recast itself more in the style of Panera Bread (PNRA) or Chipotle (CMG), which tend to charge higher prices.

But during the quarter, Wendy's said sales edged up just 0.4 percent at company-owned restaurants open at least a year in North America. By comparison, McDonald's (MCD) said Monday that its sales rose 1 percent in the U.S.

For the year, Wendy's said it expects the sales figure to grow between 2 percent and 3 percent, given its expectation for stronger sales in the second half of the year. That optimism may be fueled by the recent introduction of its Pretzel Bacon Cheeseburger, which has generated plenty of buzz online.

The company says the sale of its restaurants will reduce its ownership to 15 percent of its locations, from 22 percent. It said it now expects long-term adjusted earnings-per-share growth in the mid-teens percentage range starting next year. Previously, it had forecast single-digit to double-digit growth.

Wendy's says it earned $12.2 million, or 3 cents a share. That compares with a loss of $5.5 million, or a penny a share, a year ago. Not including one-time items, it earned 8 cents a share, more than the 6 cents a share Wall Street expected.

Revenue rose to $650.5 million, short of the $659.5 million analysts expected.

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I haven't been to a Wendy's in a long time. I used to go for the chili..and..Frostys...and maybe a hamburger....but, the quality just doesn't justify the price. Around here... Wendy's staff seem indifferent, the stores a tad on the dirty side, and the food ...marginal at best.
I think Wendy's needs a revamping. They can start with better quality control, training in customer service, and a review of their menu.
Gone are the days when Americans will stop at a fast food restaurant ...just to eat...regardless of the quality of food or service. The competition is fierce. Ask McDonalds. I doubt that they are worried about Wendys, or Hardies, Burger King or Taco Bell. They have their eyes on Panera's, and Starbucks, and the new mountain of Tex-Mex fast food restaruants. A sign of the times.
Nothing lasts forever....except ...maybe.............Twinkies.

August 09 2013 at 8:46 PM Report abuse rate up rate down Reply