010718 Wendy's Sees Rise In Q2, Lower YearJuly 14, 20Chicago, IL - Wendy's International Inc., operator of the No. 3 U.S. hamburger chain, forecast full-year earnings below its prior guidance, as rising operating costs weigh down expected results. Dublin, Ohio-based Wendy's said that full-year per share earnings would grow 11% to 13%, or $1.70 to $1.73 a share, down from the company's most recent guidance during March of 12% to 15% growth. Analysts polled by research firm Thomson Financial/First Call had expected earnings of $1.65 to $1.74 a share for the year, with a mean at $1.69, compared with $1.44 earned in 2000. “The reduced guidance was already expected, as reflected by the consensus earnings,” said Lehman Brothers restaurant analyst Mitchell Speiser, who rates Wendy's shares neutral. “It really has to do with higher costs -- utilities, beef, labor. Comps (same-store sales) have been consistently positive, but not enough to offset the cost pressures.” Speiser added that Wendy's mix of company-operated U.S. stores, about 30%, is a bit higher than competitors such as McDonald's Corp., making the chain more vulnerable to rising expenses. Wendy's shares ended down 16 cents in late trading on the New York Stock Exchange to $24.84. The stock has outperformed the Standard & Poor's 500 Index by more than 8% since the beginning of the year. SECOND-QUARTER OUTLOOK Wendy's also predicted an 11% rise in second-quarter net income, amid strength in its Tim Hortons doughnut chain. It expects to report net income of about $56 million, or 47 cents a share, including an asset gain of 2 cents a share, for the quarter. It earned 43 cents a share, also including a 2-cent gain, in the year-ago period. Analysts were forecasting earnings of 44 cents to 49 cents a share, with an average of 46 cents, according to First Call. Company-owned U.S. Wendy's restaurants open for at least a year showed sales gains of 3.1% for June and 2.8% for the quarter, the company said. “While Wendy's restaurant-level margins will be down in the quarter due to higher-than-expected costs for beef and utilities, we are optimistic about producing better results in the second half of the year,” Tom Mueller, president and chief operating officer of Wendy's North America, said in a news release. The company hopes to build traffic by focusing this summer on its Super Value Menu and late-night business. There are more than 5,800 Wendy's restaurants worldwide. Same-store sales at Canadian Tim Hortons stores were up 5.1% in June and 7.1% for the quarter. Of the chain's more than 2,000 locations, nearly 1,900 are in Canada.
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