Earnings Cheat Sheet: Wendy’s, Fresh Fries, Stale Earnings

Wendy’s/Arby’s Group, Inc. (WEN) is the third largest fast food company in the United States.  The joint company was formed in 2008, after Wendy’s and Arby’s agreed to a $2.3 billion merger.  In the past 3 months, shares have increased 23%.

Can WEN keep the momentum going after its latest earnings release?

Earnings: WEN reported a loss of $900,000 for the most recent quarter.  This lead to zero cents of earnings per share. Last year, the company reported a profit of $14.69 million, or 3 cents of earnings per share.

Revenue: WEN saw heavy competition from McDonald’s and Subway.  Revenue declined 4.7% to $861 million.

Actual versus Wall Street Expectations: WEN disappointed on total revenue and earnings per share. Analysts were expecting revenue of $882 million and 4 cents per share.

Notable Stats: Arby’s same store sales have been in an ongoing decline.  Same store sales have declined the past 14 out of 15 quarters.  The company has introduced a dollar menu in hopes of competing with McDonald’s.

Did You Hear That? CEO Roland Smith said, “Softer than expected same-store sales at both brands and higher year-over-year commodity costs negatively impacted our results.”

Commentary: For the first time in company history, WEN is changing its fries recipe.  In an effort to keep its menu fresh, WEN is leaving the potato skin on,  changing oils, and adding sea salt.  Earlier this year, investors may recall Domino’s Pizza (DPZ) reporting a large increase in sales and profits due to its new recipe.  Perhaps, Wendy’s can do the same.

Disclosure: No positions.