DUBLIN Ohio Wendy’s International Inc. on Thursday reported a steep drop in its third-quarter net income as year-ago profits from the now-spun-off Tim Hortons, restructuring costs and expenses from the company’s current strategic review chopped latest-quarter earnings by more than half from a year ago.
Still, the parent company of 6,600 corporate or franchised Wendy’s locations posted a 55-percent jump in income from continuing operations for the third quarter and said it expects to hit the higher end of its annual per-share earnings target of between $1.09 and $1.23. That range excludes restructuring charges and board expenses for the company’s review of options, which began in April and focuses on a recapitalization or a sale of the company.
Net income for the third quarter ended Sept. 30 totaled $29.9 million, or 34 cents per share, compared with year-ago profit of $69.2 million, or 58 cents per share.
Excluding charges related to Wendy’s strategic review and excluding the profits booked from Tim Hortons a year ago, Wendy’s posted a profit of $38.6 million, or 44 cents a share, compared with $24.9 million, or 21 cents a share, a year ago.
Those excluded items included a $13.4 million charge related to Wendy’s possible sale process and $2.4 million in restructuring charges. Year-earlier results included $47.5 million from discontinued operations.
Wendy’s said that hitting the higher end of its fiscal 2007 target reflects improved restaurant margins and cost controls. Margins at corporate locations systemwide increased 2.7 percent from a year ago, and margins at U.S.-based corporate restaurants rose 3.3 percent, Wendy’s reported. It cited positive sales aided by menu price increases from the chain’s new market-based pricing strategy and labor efficiencies for the improved results.
Revenue for the third quarter remained basically flat at $631.1 million versus $630.1 million a year ago. The company operated 42 fewer locations in the latest quarter versus a year ago, and franchisees operated 66 fewer units than the third quarter of last year. Third quarter same-store sales increased 0.2 percent at U.S. corporate restaurants and rose 1.3 percent at U.S. franchised units. The chain has been adjusting its prices, usually upward, on a market-by-market basis to bring them more in line with competitors’ prices.
In the current fourth quarter, Wendy’s plans to promote its Combo Choices deal, which allows customers to mix and match a sandwich, drink and side item. In November, the chain will promote its Jalapeno Cheddar Double Melt premium hamburger. The company also will continue to roll out its breakfast offerings, which are now available at about 850 restaurants.