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VIDEOWendy's Cuts the Fat
By
Scott Reeves Mar 02, 2009 3:05 pm
Brief scrutiny of today's headlines.
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The company plans to open 10 company-owned Wendy’s stores this year and 5 company-owned Arby’s. In 2008, by contrast, the company opened 15 Wendy’s and 70 Arby’s.
The company was organized last September when Triarc, Arby’s parent, acquired Wendy’s for about $2 billion and changed the name. Wendy’s is the nation’s number-3 hamburger chain behind McDonald’s (MCD) and Burger King (BKC).
Tighter consumer spending and a write-down resulted in Wendy’s/Arby’s reporting a fourth-quarter net loss of $392.2 million, or $0.84 a share. A year ago, Triarc reported net income of $33.3 million, or $0.33 a share.
McDonald’s has successfully emphasized its low-priced offerings in the recession. Worldwide, same-store sales increased 7.2% in the fourth quarter, including 5% in the US.
Burger King reported its nineteenth consecutive quarter of growth in the US and Canada. Sales were up 1.9% in the second quarter of fiscal year 2009. The company plans to go after the high- and low-end of the market, rolling out an extra-thick premium burger as well as a mini-burger for those seeking what the company calls “value-priced alternatives.”
North American sales increased 3.7% at Wendy’s, but fell 8.5% at Arby’s. The company continues to discount, but competitors offer sandwiches at about $5 while Arby’s selection averages $7.50.
In a recession, that makes all the difference. Arby’s has struggled, and it’s difficult to imagine that deep discounting would boost volume enough to make up for lower prices.
No positions in stocks mentioned.
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