Wendy's stands by outlook as company pushes transformation efforts

NEW YORK, N.Y. – Wendy’s is standing by its outlook for the year as it pushes ahead with restaurant remodeling plans intended to boost its image.

The company, based in Dublin, Ohio, says about 20 per cent of its U.S. locations will be remodeled by 2015. The new look, which includes comfortable seating areas and flat-screen TVs, is intended to have a more inviting feel and is part of the company’s goal of positioning itself on the higher end of the fast-food industry.

Wendy’s has about 6,500 locations, primarily in North America.

In a conference call with analysts, Chief Financial Officer Steve Hare said sales at established restaurants in the first quarter of the year are off to a solid start after a modest performance a year ago. He declined to provide details, but the company said the new “Right Price, Right Size” value menu is resonating with customers.

Even as it tries to strengthen its image as a purveyor of more premium food, Wendy’s is looking to step up its courtship of fast-food customers who are focused squarely on value. But the new menu has a tiered pricing strategy ranging from 99 cents to about $2 intended to sell items at more profitable price. Items on the previous menu all cost 99 cents, which was an issue for some franchisees because the profit margins were too thin.

The company’s push to reinvent itself comes as people are increasingly eating at fast-casual chains such as Panera Bread Co., which offers food that’s perceived to be higher quality for slightly higher prices. A better image could give Wendy’s more wiggle room to raise prices without scaring off customers.

For the period ended Dec. 30, Wendy’s Co. said its net income rose sharply because of a larger tax benefit and lower interest expense. It earned $26.4 million, or 7 cents per share, compared with $4 million, or 1 cent per share, a year ago.

The company revised its preliminary adjusted results showing earnings in January to reduce the estimate for charges related to discontinuing breakfast at certain locations and to reduce depreciation and amortization. It now says adjusted earnings were 9 cents per share in the period.

Analysts surveyed by FactSet expected 8 cents per share.

Revenue rose 2 per cent to $629.9 million. Analysts expected revenue of $630 million.

Its shares rose 12 cents, or 2.2 per cent, to $5.62 in trading 90 minutes before the market opening.

As previously reported, the company said sales at established restaurants slipped 0.2 per cent, after a strong performance in the year-ago period that got a boost from the introduction of Dave’s Hot ‘n Juicy burgers. The measure is a key indicator of a financial health because it strips out the impact of newly opened and closed locations.

Looking ahead to 2013, the company affirmed its outlook for growth of 2 per cent to 3 per cent at restaurants open at least 15 months and remodeled restaurants open at least three months. It reaffirmed its forecast for adjusted earnings between 18 cents and 20 cents per share. Wall Street predicts 18 cents per share.