* Q4 adj EPS 7 cents vs Street view 3 cents
* 2010 EBITDA outlook below Street view
* Shares down 5.3 percent (Adds analyst and executive comments; updates share movement)
By Lisa Baertlein
LOS ANGELES, March 4 (Reuters) - Wendy's/Arby's Group Inc WEN.N cut its 2010 earnings growth forecast below Wall Street estimates on Thursday as it tries to turn its fast-food restaurants around, and its shares fell more than 5 percent.
The disappointing outlook overshadowed the company's news that quarterly profit came in higher than expected despite continued declines in closely watched same-store sales at both brands.
The Wendy's and Arby's chains each suffered from neglect prior their $2 billion merger in September 2008. They now are fighting to catch up with rivals in terms of restaurant appearance, operations, menu variety and value.
Their parent company, the third-largest U.S. fast-food restaurant operator, plans to spend more money in 2010 to boost results at the chains.
That bigger investment, in combination with weak economic conditions, forced executives to temper growth forecasts.
Wendy's/Arby's said it expected adjusted earnings before interest, taxes, depreciation and amortization to increase at a low- to mid-single-digit percentage rate in 2010, with growth returning to the mid-teens in 2011 if the economy improves. It previously had said it expected average annual growth in the mid-teens through 2011.
RBC Capital Markets analyst Larry Miller said in a note that the outlook equated to 2010 EBITDA of $430 million to $445 million, missing the analysts' average estimate of $450 million.
Rampant industry discounting has even the best operators fighting to boost sales and profits, and investors remain cautious about Wendy's/Arby's prospects.
While margins improved in the latest quarter, Bernstein Research analyst Sara Senatore said in a note that the company's weak same-store sales and lowered 2010 expectations "speak to challenges."
Fourth-quarter systemwide sales at Wendy's North American established restaurants dropped 3 percent, weakened by the removal of breakfast from about 300 locations. Arby's North America systemwide same-store sales plunged 11 percent as the chain continues to struggle.
By comparison, industry leader McDonald's Corp (MCD.N) reported a 1 percent rise in fourth-quarter U.S. systemwide sales, which include all established restaurants, whether operated by the company or by franchisees.
Several large fast-food chains recently have reported declines in same-store sales as unemployment among young men and minorities -- groups that account for a large percentage of fast-food diners -- hovers at rates higher than the national average. Still, declines of 10 percent or more raise flags.
Wendy's/Arby's said same-store sales should rise at Wendy's this year but fall at Arby's as it works on improvements and boosts national advertising.
This year, the company is rolling out its revamped Wendy's breakfast in more new markets, focusing on the chain's reputation for serving fresh food, and adding premium sandwiches. At Arby's, which has traditionally sold sandwiches at higher prices than its peers, it is remodeling stores and taking the value menu national in April.
"Because Arby's has lacked an everyday value menu, we've not been able to compete effectively in this environment, and we've lost a significant number of transactions and sales," Chief Executive Officer Roland Smith said on a conference call.
Wendy's/Arby's said same-store sales trends improved at North American company-operated locations in January, as Wendy's promoted items such as 99-cent spicy chicken nuggets and Arby's expanded its $1 value menu to more than 2,500 restaurants. Wendy's posted a 0.3 percent rise, and Arby's, a 7.4 percent decline.
The fourth-quarter net loss at the company narrowed to $13.6 million, or 3 cents per share, from $393.2 million, or 84 cents a share, a year earlier, when it booked significant charges.
Excluding charges, Wendy's/Arby's earned 7 cents a share in the latest quarter, topping the analysts' average forecast of 3 cents, according to Thomson Reuters I/B/E/S.
Consolidated fourth-quarter revenue from the 10,000-plus restaurant chain rose 0.5 percent to $900.9 million, below the $914.8 million analysts had expected.
Wendy's/Arby's shares were down 5.3 percent at $4.68 in afternoon New York Stock Exchange trading. (Reporting by Lisa Baertlein in Los Angeles and Jessica Wohl in Chicago; Editing by Derek Caney, John Wallace and Lisa Von Ahn)