LOS ANGELES (Reuters) - Fast-food chain operator Wendy's/Arby's Group Inc lowered its 2010 earnings forecast, posted lower quarterly profit and revenue missed expectations as same-store sales at its Arby's roast beef sandwich restaurants tumbled.
Shares of the No. 3 U.S. fast-food chain were down less than 1 percent Thursday after it said that closely watched systemwide sales at Arby's North America restaurants open at least 15 months fell 7.4 percent in the second quarter.
While the result was among the weakest reported by a large fast-food chain, it improved from the first quarter's 11.5 percent drop.
Wendy's and Arby's were suffering from neglect before their $2 billion merger in September 2008. They are rushing to catch up with rivals in restaurant appearance, operations, menu variety, value and international expansion.
Arby's has tightened operations and introduced a value menu to help it better compete with rivals like Burger King and Jack in the Box, which also are grappling with high unemployment among the young men that make up their core customers.
Wendy's, which has fared better, reported a 1.7 percent fall in systemwide sales at established North America restaurants for the latest quarter, when it put the spotlight on items like $2.99 value meals.
Wendy's/Arby's President and Chief Executive Roland Smith expects Wendy's sales at established restaurants to turn positive this quarter. Wendy's August and September results should get a bump from its new salads and value promotions like 99-cent spicy chicken nuggets, he said on a conference call.
Wendy's, which touts its use of fresh ingredients, was a pioneer among fast-food chains when it debuted Garden Sensations salads in 2002. It rolled out four new salads nationwide in July and plans to relaunch breakfast across the United States in late 2011.
NET INCOME DOWN
Parent Wendy's/Arby's reported second-quarter net income of $10.7 million, or 3 cents per share, down from net income of $14.9 million, or 3 cents per share, a year earlier.
Excluding special charges, profit was 6 cents a share.
Revenue fell 1.3 percent to $607.4 million.
Analysts, on average, were looking for a profit of 5 cents per share on revenue of $887 million, according to Thomson Reuters I/B/E/S.
Wendy's/Arby's forecast 2010 earnings before interest, taxes, depreciation and amortization to fall 3 percent to 5 percent from 2009. It previously forecast a low- to mid-single-digit percentage rate increase in adjusted EBITDA.
While Arby's same-restaurant sales trends should improve from 2009 levels, executives repeated their call for a full-year decline.
Wendy's same-restaurant sales are expected to be flat versus a year earlier, compared with the company's prior call for a rise.
McDonald's Corp, which has used its large size and popular beverage expansion to outperform rivals, reported a 4.8 percent rise in global same-store sales for the second quarter.
Shares in Wendy's/Arbys were off 2 cents, or 0.5 percent, to $4.13 in afternoon trading on the New York Stock Exchange. (Reporting by Lisa Baertlein. Editing by Robert MacMillan)