Selling roast beef sandwiches, burgers and Frosty desserts is not an easy business these days, as Wendy's/Arby's Group can attest.
The Sandy Springs-based company's sales and profits fell in the second quarter as unemployment and aggressive discounting by fast-food competitors took its toll. Revenue fell to $877 million from $912.7 million in the same period a year ago. The 4 percent decline came mainly from a $28 million revenue drop at Arby's and CEO Roland Smith said it will "take some time" before investors see growth at established Arby's stores.
But Wendy's, which accounts for about 70 percent of the parent company's business, was not immune, suffering a $7.8 million drop in company-owned stores that have been open at least one year. The sales results were surprisingly weak at both brands.
Reported profits dropped 28 percent to $10.7 million or 3 cents per share. In the same period a year ago, the company earned $14.9 million, which also worked out to 3 cents per share because of a reduction in the number of shares of stock outstanding.
The company predicted that sales at Wendy's stores open at least a year would be flat and those at Arby's would be down in 2010. Earnings before interest, taxes, depreciation and amortization -- a measure of a company's core profitability -- are expected to shrink between 3 percent and 5 percent.
Wendy's/Arby's is spending money on long-term projects, including a breakfast program at Wendy's, which will require an additional $8 million in advertising later this year. It is also remodeling restaurants and announced a variety of international plans this week, with hundreds of new restaurants to open in a variety of markets including Russia and the Caribbean.
The company said sales at Wendy's improved with the July 19 launch of national advertising for new salads. Wendy's plans to return to "value" advertising to appeal to dollar-conscious diners later this year. Sales trends at Arby's also improved when the brand started advertising $1 value-menu roast beef sandwiches on July 19.
Get the news faster! Follow us on Twitter here.
About the Author
