Wendy’s/Arby’s Says Making ‘Substantial Progress’ on Sale
Wendy’s/Arby’s Says Making ‘Substantial Progress’ on Sale
Matthew Staver/Bloomberg
An Arby's restaurant sign stands near a Wendy's restaurant in Lakewood, Colorado.
An Arby's restaurant sign stands near a Wendy's restaurant in Lakewood, Colorado. Photographer: Matthew Staver/Bloomberg
Wendy’s/Arby’s Group Inc., the third- largest U.S. fast-food chain, said it’s making “substantial progress” on the sale of the Arby’s brand and undoing the tie- up led by shareholder Nelson Peltz.
The company has narrowed its list of potential buyers to “several quality bidders,” Chief Executive Officer Roland Smith said today in a conference call to discuss first-quarter results. He didn’t name the candidates. Wendy’s/Arby’s said in January that it hired UBS to help in the process.
Splitting the two restaurant groups, united at Peltz’s urging in 2008, would allow Smith to focus on expanding the Wendy’s franchise beyond its more than 6,500 stores. Arby’s may appeal to a franchisee buyer that already operates Arby’s locations, said Sara Senatore, an analyst at Sanford C. Bernstein & Co. in New York.
“A financial bidder who is looking for cash flow” also may be interested, said Senatore, who rates the shares “market perform.” The company said today that first-quarter sales at Arby’s North American stores open at least 15 months climbed 5.5 percent, compared with little change at Wendy’s outlets.
The shares advanced 20 cents, or 4.2 percent, to $5.02 at 4:02 p.m. in New York Stock Exchange composite trading, the most in two months. They have risen 8.7 percent this year, compared with an 11 percent gain in the Standard & Poor’s Midcap 400 Index.
Earnings Performance
The Atlanta-based company posted first-quarter profit, excluding items such as strategic evaluation costs, of 1 cent a share, compared with the 2-cent average of estimates compiled by Bloomberg. Revenue rose 1.2 percent to $848 million, close to analysts’ estimates.
Wendy’s, along with other restaurant operators, is facing rising prices for ingredients such as meat. The fast-food chain expects beef costs to rise 20 percent in 2011, compared with a previous forecast of as much as 15 percent, Chief Financial Officer Stephen Hare said during the call. Total commodity costs will jump as much as 6 percent this year, he said.
Wendy’s has sought to attract customers at different times of the day and compete with larger McDonald’s Corp. (MCD) by introducing new breakfast foods. By the end of the year, 1,000 Wendy’s locations will sell breakfast, Smith said. McDonald’s is the biggest U.S. fast-food chain, followed by Yum! Brands Inc.
“Their goal is certainly to compete with McDonald’s,” Senatore said. In the fast-food industry, “breakfast is really the only part of the business that is growing,” she said.
To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
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