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Wendy’s closes in on Arby’s sale

Executives of the Wendy’s/Arby’s Group Inc. said on Tuesday they have narrowed the sale of Arby’s to several bidders and the company wants to bring the process to a close as rapidly as possible.

Divesting Arby’s would allow the Atlanta-based company to focus its resources on positioning Wendy’s for a projected growth of 10 percent to 15 percent in 2012, Roland Smith, Wendy’s/Arby’s Group president and chief executive, told analysts in a conference call.

Company revenues for the first quarter ended April 3 grew 1.2 percent to $848 million, while the company narrowed its net loss to $1.4 million, or $0.00 per share, which included a net after-tax special charge of $6.0 million, or $0.01 per share. The net loss for the first quarter of 2010 was $3.4 million, or $0.01 loss per share, which included after-tax special charges of $12.0 million, or $0.03 per share, according to the company.

Wendy’s U.S. systemwide same-store sales increased 0.3 percent while its North America systemwide same-store sales were flat — negatively impacted by the effect of higher sales taxes in two Canadian provinces. The brand has 367 locations in Canada.

Wendy’s North America company-operated same-store sales declined 0.9 percent while Wendy’s North America franchised same-store sales increased 0.3 percent.

Wendy’s said it faced commodities pressure in the first quarter. The company, which initially had forecast beef costs would rise 10 percent to 15 percent in 2011, raised that figure to 20 percent. Total commodity basket costs previously were expected to increase 2 percent to 3 percent, but now the expectation is 5 percent to 6 percent, Smith said.

To cope with rising commodity costs, officials are planning some new product introductions and strategic price increases.

In April 2011, Wendy’s rolled out natural-cut fries with sea salt, and in May plans to debut a bacon mushroom melt hamburger sandwich. In June it will launch a new berry almond chicken salad and wild berry tea.

In July, Wendy’s expects to introduce a Fresh Berry Frosty drink.

Wendy’s also is attempting to build sales in its new breakfast daypart, which officials say could generate as much as $13 billion in sales — or 23 percent of all sales — for the entire quick-service hamburger category. In the past year, Wendy’s rolled out breakfast offerings in six test markets, with the menu items including an artisan egg sandwich, the Mornin’ Melt Panini, a biscuit sandwich and a fire-roasted burrito.

In 2010, the breakfast launch was unveiled in Pittsburgh, Kansas City, Phoenix and Shreveport and has been expanded to the Louisville, Ken., and San Antonio markets. Ultimately, Wendy’s hopes to have its breakfast menu in 1,000 stores by the end of 2011.

Smith said annualized average weekly sales are meeting incremental breakfast sales target of $150,000.

Smith called the breakfast launch an offensive move to grow sales and said an earlier breakfast initiative failed four or five years ago because the marketing, awareness and trial efforts were missing at that time.

Officials said they are planning changes in other dayparts as well.

In the second half of 2011, Wendy’s expects to introduce new core menu items such as Dave’s Hot ‘n Juicy cheeseburgers and a line of premium chicken sandwiches.

The burgers, which will be unveiled in seven test markets, will be 40-percent larger and served on butter-toasted buns, Smith said.

The new chicken line for 2011 includes an Asiago ranch selection in first quarter and the “gold chicken” with new flavors such as bruschetta and diced basil in fourth quarter.

Wendy’s also is planning to launch a new restaurant remodeling program in late September, with four designs being considered, Smith said. He said there will be an “aggressive rollout in 2012.”

On the international front, Wendy’s/Arby’s is accelerating its expansion with six long-term development agreements in 23 countries. There are plans for 180 Wendy’s units in Russia, 100 in Turkey, 79 in the Middle East, 50 in Argentina, 35 in Singapore and 24 in the east Caribbean. There is also a joint venture agreement with Higa Industries, Ltd. to develop restaurants in Japan. The company is also pursuing deals in China and Brazil, Smith said.

Contact Alan Snel at [email protected].

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