Wendy's Slips in 3Q as Costs from Arby's Sale offset Success of its Dave's Hot 'N Juicy Burger Line

Wendy's
Wendy's pretzel burger has been a success in test markets and could make its national debut later this year. Reuters

Wendy's Co. reported further losses in its third-quarter earnings report released Thursday, as the fast-food conglomerate battled higher costs of food and continued costs from its sale of the Arby's restaurant chain in July.

Wendy's widened its net loss to $3.97 million from a $909,000 loss over the same period one year ago. That is almost a loss of a penny per share. The company lost more than $6.5 million from discontinued operations.

Identical-store sales grew about 1.8 percent from last year. Revenues rose about 2 percent to $611 million. But both numbers missed many analysts' estimates.

In a statement, CEO and president Emil Brolick reiterated the company's positive outlook for the full year.

We generated transaction growth, which contributed to a 1.8% same-store sales increase at Wendy's North America Company-operated restaurants, during the third quarter of 2011. Wendy's remains on track to produce positive transactions for the year, Brolick said.

Wendy's has revamped its menu this year and since Brolick was named CEO on Sept. 1. In the company's third-quarter earnings, Brolick touted the success of a new item introduced in October, Dave's Hot 'N Juicy burgers.

The very successful October launch of Dave's Hot 'N Juicy cheeseburger product line has exceeded our expectations and will re-establish our leadership in the premium-quality hamburger category, Brolick said. The company did not delve further into specifics of the burger line's success.

Wendy's has also introduced new chicken sandwiches and at least one other burger line in the past year.

Wendy's closed the sale of Arby's to a private-equity firm on July 5, explaining the need to focus on its own brand rather than restoring Arby's. According to The Associated Press, the merger between Wendy's and Arby's yielded net losses in seven of the 10 quarters it produced earnings reports as a combined company.

Looking ahead to its full-year outlook, Wendy's expects identical-store growth of 1 to 3 percent on the strength of the Dave's Hot 'N Juicy burger line. The company said its restaurant would be 100 basis points lower than the previous year, due to higher commodity costs.

Shares of Wendy's dropped 3.28 percent Wednesday as of 1:30 p.m. ET.

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