Wendy's CEO: 'Quality Bidders' Cooking Up Offers to Buy Arby's

Tuesday, 10 May 2011 12:10 PM

 

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Wendy's/Arby's Inc. is getting closer to selling its Arby's chain and has "several quality bidders," CEO Roland Smith said Tuesday.

Smith, in a first-quarter earnings call with analysts, said the bidders had completed "significant due diligence" and had come from a larger pool that had expressed interest. He didn't give details or a time line but said it is "in the best interest of the company to bring this process to closure as soon as possible."

Wendy's/Arby's Group Inc. also plans to raise prices, following in the footsteps of competitors like McDonald's Corp. The company also cut its earnings outlook because of rising costs for beef and other ingredients.

The announcements came as the company reported a first-quarter loss and said revenue at Wendy's locations had stagnated.

In a statement, Smith called the run-up in beef prices "unprecedented." He said the restaurant plans "prudent" price increases, meaning it doesn't want to raise prices so much that customers opt to eat at home instead.

Wendy's/Arby's also blamed the rising beef costs for its decision to lower its predictions for adjusted earnings for the year, to between $330 million and $340 million. In March it had said it expected to make $345 million to $355 million.

Wendy's/Arby's net loss of $1.4 million, or break-even per share, was narrower than the loss of $3.4 million, or 1 cent per share, in the same quarter last year.

Excluding a charge, the most recent quarter's earnings were 1 cent per share. Analysts expected earnings of 2 cents per share.

Revenue rose about 1 percent to $848 million, beating analysts' expectations of $820 million.

The improvement was driven by Arby's, which saw revenue increase 5 percent, while Wendy's revenue declined less than 1 percent.

Wendy's/Arby's had been trying to sell the Arby's brand at least since January. Smith said the Arby's turnaround "is progressing nicely" and the company continues "to make progress with regards to our strategic alternatives process."

His statements on Wendy's were more enthusiastic. The company plans to introduce new products there this year, including a Berry Almond Chicken Salad, and continue expanding the number of locations that serve breakfast.

Unlike some rivals, Wendy's/Arby's still does most of its business domestically. Of its 10,200 locations, about 350 are franchise restaurants outside of North America. But the company is intent on expanding overseas, with plans in place for Singapore, Turkey, Argentina and elsewhere.

The first Wendy's franchises in Russia will open this month. That's a page from the playbook of its rivals, including McDonald's, which gets only about 32 percent of its revenue from the U.S.

Last month, much larger rival McDonald's said it expected to raise prices as well, after already raising them 1 percent in early March.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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