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UPDATE 1-Wendy's forecasts full-year profit above estimates, shares rise
January 13, 2014 / 2:10 PM / 4 years ago

UPDATE 1-Wendy's forecasts full-year profit above estimates, shares rise

Jan 13 (Reuters) - Wendy’s Co, the second-largest U.S. hamburger chain, forecast strong full-year earnings as it cuts operating costs by franchising its restaurants.

Shares of the company, which also estimated adjusted quarterly earnings above analysts’ expectations, jumped 10 percent before the bell.

The company, known for its square, fresh beef burgers and thick “Frosty” milkshakes, has been selling company-owned restaurants to franchisees as it looks to cut costs and fund a long-term image overhaul.

The company said in July it planned to sell 425 outlets by mid-2014. It sold, or signed letters of intent to sell, 384 restaurants through 2013. Wendy’s had 6,558 restaurants, including franchisees, as of Dec. 29.

The company has been revamping its restaurants and adding new products such as the Pretzel Bacon Cheeseburger to its menu to fend off competition from McDonald’s Corp and Burger King Worldwide Inc.

The Dublin, Ohio-based company on Monday forecast full-year adjusted earnings of 34-36 cents per share, beating the average analyst forecast of 29 cents per share.

It said it expects company-operated same-restaurant sales to rise 2.5-3.5 percent for the full year.

For the fourth-quarter ended Dec. 29, the company estimated net income of $25.2 million to $28.7 million, or 6-7 cents per share, compared with $26.4 million, or 7 cents per share, a year earlier.

Costs fell 5 percent in the quarter to $568.3 million.

Excluding items, the company earned 10-11 cents per share.

Total sales fell 6 percent to $592.4 million.

North America company-operated same-restaurant sales rose 3.1 percent in the quarter, helped by higher sales of Pretzel Pub Chicken sandwich and Bacon Portabella Melt on Brioche.

Franchise same-restaurant sales increased 2.8 percent.

Analysts on average had expected Wendy’s to report a profit of 6 cents on revenue of $611.3 million for the fourth quarter, according to Thomson Reuters I/B/E/S.

Wendy’s said it reported estimated earnings in a range as it had not yet completed its tax closing procedures for 2013.

The company also said it would buy back up to $275 million in shares.

Wendy’s shares were up 7.7 percent at $9.09 in premarket trading.

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