Both Wendy’s and Arby’s, now part of the same company, swung to losses in the third-quarter as weak sales and acquisition costs grilled their bottom lines.
The combined Wendy’s/Arby’s Group (WEN) became official in September, after Triarc Cos. Inc, the parent company of Arby’s, bought the nation’s third-largest hamburger chain. Triarc kept each chain’s quarterly results separate, given that the takeover wasn’t finalized until late in the quarter.
Wendy’s
Wendy’s saw a loss of $29.85 million, or 34 cents per share, compared with a profit of $29.9 million, or 34 cents per share, in the same quarter a year ago. The company incurred a $68.5 million charge for costs associated with the merger, but did not report an adjusted profit figure.
The hamburger giant posted revenue of $624.9 million, down from last year’s $629.8 million, as economic concerns pressured consumers to tighten up on their spending.
Wendy’s same-store sales, or sales in stores open at least a year, fell 0.2% in both the company-owned and franchise stores. Despite the overall decrease, the company’s same-store sales showed a 2.1% increase in September and 5% increase in October.
Wendy’s/Arby’s Chief Executive Roland Smith attributed that increase to the company’s new value menu offerings, which included the Double-Stack Cheeseburger, Crispy Chicken Sandwich and the Junior Bacon Cheeseburger.
Looking ahead, Smith said he believes the brand will recover from its weak quarter.
“We have demonstrated the ability to drive superior profit margins in the past and are committed to building on that track record,” he said.
Arby’s
Triarc weighed in with a third-quarter loss of $12.1 million, or 13 cents per share, compared with a profit of $3.7 million, or 4 cents per share, in the year-ago period. The company’s adjusted earnings were $24.4 million, compared to $38.2 million in the same quarter last year.
The company said its revenue fell 4% to $310.4 million in the weakened economic environment. Same-store sales at Arby's company-owned stores fell 7.2% and same-store sales for franchise stores fell 4%.
The company attributed its same-store sales decline on declining customer traffic, which it said was made worse by the “aggressive” price discounts offered by competitors.
Going forward, Smith said the company will focus its efforts on Arby’s core customers and signature products -- its roast beef items and toasted subs.
“We believe that the inherent strength of Arby's quality brand positioning, more targeted advertising and new products aimed at our core customers will lead to sales growth and improved operating margins,” Smith said.
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