Wendy's International Inc, reporting record sales and profits for the second quarter, said second half sales comparisons will be harder amidst rising labor and raw material costs and a higher tax rate.
The company's quarterly net income rose 16% to $57 million, or $0.42 a fully diluted share, from $49.3 million, or $0.38 a share, a year ago.
A First Call poll of 21 analysts had correctly predicted the fast food chain's earnings at $0.42 a share.
"We had a solid first half and we're on track for another record year," said chief executive Gordon Teter in a statement. "The second half presents more challenges as sales comparisons will be harder against a great second half in 1996. In addition, we'll face pressure from various costs including labor and raw products, as well as a higher income tax rate."
Wendy's revenues rose to $540.2 million for the quarter from $491.9 million, while systemwide sales rose 14.8% to a record $1.6 billion. Teter said the chain's introducion of fresh stuffed pitas "met all our expectations."
Teter said average sales per U.S. company Wendy's restaurant increased 10.3% in the quarter, and operating margins rose to 17.2% versus 14.5% a year ago.
Wendy's franchised 81 company-owned restaurants to franchisees and sold real estate resulting in a pretax gain of $26.6 million, compared with $26.8 million a year ago.
A total of 86 new Wendy's opened in the quarter, including 28 company and 58 franchises, bringing Wendy's total to 5,051 Wendy's Old Fashioned Hamburgers restaurants open and another 102 under construction.
Average same-store sales for the company's Tim Hortons restaurant division rose 8.6% in the quarter. Tim Hortons added 27 new restauarants in the quarter, bringing the total to 1,442.
Wendy's stock traded at 27 Wednesday afternoon, down 13/16 but close to its 52-week high of 27-7/8.
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