Commodity costs weigh on U.S. restaurant results
SAN FRANCISCO (Reuters) - Hamburger chain Wendy's International Inc (WEN.N) and other U.S. restaurant companies posted mixed financial results on Tuesday as higher costs for everything from wheat to fuel continued to eat away profits.
Wendy's, which is being acquired by the parent company of Arby's, posted a worse-than-expected decline in quarterly profit due to commodity cost rises and restructuring charges.
Wendy's, the third-largest U.S. hamburger chain, said second-quarter commodity costs jumped about $11 million from a year ago due primarily to rising grain and fuel prices.
Steep increases in commodity prices also played a role at fast-food purveyor Jack in the Box Inc JBX.N and pizza delivery company Papa John's International Inc (PZZA.O), but to different degrees.
Fiscal third-quarter profit at Jack in the Box fell about 13 percent, as expected, hurt by higher costs for packaging and ingredients like beef, cheese, eggs and shortening.
On the other hand, Louisville, Kentucky-based Papa John's posted a nearly 9 percent rise in second-quarter net income, helped by new restaurant openings and a rise in overall sales at established U.S. restaurants.
"Given the brutal commodity and consumer environment, our second quarter comps were very encouraging and our earnings and cash flow yield remained strong," Papa John's President and Chief Executive Nigel Travis said in a statement.
"As the commodities market and operating environment remain both difficult and unpredictable, we will continue to look for ways to assist both our corporate and franchise operators through this difficult period while driving top line sales," Travis said.
Cheese prices were up more than 25 percent from the year-earlier quarter and wheat costs in the first half more than doubled from the year-ago period, Papa John's said.
Higher costs have eroded profits at restaurants for about a year but operators have been reluctant to raise prices to compensate because they fear alienating customers who are already grappling with higher grocery and gasoline bills.
One company that has managed to push through menu price increases is Triarc Cos Inc TRY.N, the Arby's parent that is paying about $2 billion to buy Wendy's in a transaction slated to close later this year.
Triarc's second-quarter loss narrowed to $6.9 million from $28.0 million a year earlier, when it booked a large loss on investments.
But the company, despite raising prices to offset higher food costs, said higher labor costs and energy costs hurt margins during its latest quarter.
(Editing by Braden Reddall)
