Wendy's/Arby's in Line

• By Zacks Equity Research
• On 8:38 am EST, Monday November 9, 2009

Wendy’s/Arby’s Group, Inc. (NYSE: WEN - News), the third largest fast-food restaurant operator, recently reported third-quarter 2009 results. The quarterly earnings of 6 cents a share were in line with the Zacks Consensus Estimate. The company had reported a loss of 14 cents in the prior-year quarter, excluding income from discontinued operations. Lower commodity prices and cost-cutting initiatives have driven earnings.

 

Consolidated revenue surged 191% year-on-year to $903.2 million due to Wendy’s merger, which added 6,608 restaurants as of Sep 27, 2009, and contributed $613.5 million in total revenue during the quarter. The merger between Triarc Companies, the franchisor of the Arby’s restaurant chain and Wendy's International was completed in Sep 2008. 

The quick-service food chain is trying to lure consumers by offering $5.01 combo meals, and plans to make $1 menu available at most of its restaurants to compete with big players like McDonald’s Corporation (NYSE: MCD - News) and Burger King Holdings Inc. (NYSE: BKC - News). 

Fast food chains are faring better than casual dining operators like Red Robin Gourmet Burgers Inc. (RRGB) and Cosi Inc. (COSI) as cash-strapped consumers are trading down to cheaper alternatives or dining at home. 

Wendy’s Financial Highlights: 

Wendy’s total revenue for the quarter fell 1.8% to $613.5 million due to lower comparable-store sales. Company-operated restaurants sales declined 2.1% to $536.8 million, whereas franchise revenue climbed marginally by 0.1% to $76.7 million.

 

The company-operated comparable-store sales increased 0.1%, whereas franchise comparable-store sales ascended 0.4%. However, comps remained weak in Oct 2009. Company-operated restaurant margin for the quarter expanded 400 basis points to 16.5% reflecting reduction in food, labor and certain controllable costs.

 

Management expects to improve full year restaurant margins by more than 250 basis points, which is half of the company’s three-year target of 500 basis points increment in restaurant margin. 

Arby’s Financial Highlights: 

Arby’s total revenue for the quarter fell 6.7% to $289.7 million due to lower comparable-store sales. Company-operated restaurants sales declined 6.4% to $269.2 million, whereas franchise revenue slipped 9.9% to $20.5 million. 

The company-operated comparable-store sales dipped 6.5%, whereas franchise comparable-store sales plunged 10.2%. Comps further softened in October. Company-operated restaurant margin for the quarter shrank 450 basis points to 12.1%.

WENDY'S/ARBY'S GROUP CL A (WEN): Read the Full Research Report

MCDONALDS CORP (MCD): Read the Full Research Report

BURGER KING HLDGS INC (BKC): Read the Full Research Report

RED ROBIN GOURMET BURGERS INC (RRGB): Read the Full Research Report

COSI INC (COSI): Read the Full Research Report

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