Wendy's/Arby's Group loses money in 3Q

ATLANTA — The operator of Wendy's and Arby's restaurants lost money in its third quarter, pressured by higher commodity costs and weak performances at both restaurant chains.

Wendy's/Arby's Group Inc. also lowered its 2010 adjusted EBITDA outlook on Friday, but boosted its quarterly cash dividend by 33 percent.

Its stock lost 27 cents to $4.77 in premarket trading.

The Atlanta-based restaurant operator is concentrating on improving performances at both of its brands, which includes the launch of breakfast offerings at its Wendy's locations nationally starting late next year. Wendy's/Arby's lost $909,000, or break-even on a per-share basis, for the period ended Oct. 3. That compares with earnings of $14.7 million, or 3 cents per share, a year ago.

Analysts expected a better performance, predicting earnings of 4 cents per share. These estimates typically remove one-time items.

Revenue fell 5 percent to $861.2 million from $903.2 million, missing Wall Street's $882.6 million.

"The third quarter was a difficult one for both brands," President and CEO Roland Smith said in a statement. Systemwide sales at Wendy's restaurants open at least a year in North America dropped 1.7 percent for Wendy's, while Arby's reported a 5.9 percent decline in the figure.

This metric is a key gauge of a restaurant operator's performance because it measures results at existing restaurants rather than newly opened ones.

Smith said the quarterly results were not satisfactory and that it will work on creating more high quality, differentiated menu items for both Wendy's and Arby's. The company also plans to continue remodeling restaurants and increase its presence overseas.

Wendy's/Arby's will continue its Arby's turnaround efforts as well. Smith said Wendy's/Arby's was encouraged by the performance of the chain's everyday value menu in October, which reported a 5.5 percent increase in sales at company run stores open at least a year.

The restaurant operator says Wendy's success is pegged to the quality of its food offerings, citing its hamburgers, which are never frozen. The chain will debut its natural cut, sea salted skinned french fries later this month. It is currently testing a new premium cheeseburger line.

A big push will come late next year, when Wendy's rolls out breakfast items nationally. Smith said initial results from some breakfast test markets have been encouraging.

Wendy's/Arby's now anticipates its full-year adjusted earnings before interest, taxes, depreciation and amortization will come in at the lower end of its prior guidance for an estimated 3 percent to 5 percent decline. The restaurant operator also predicts sales at Wendy's company-run restaurants in North America will fall about 1 percent for the year. It anticipates a decline in that metric for Arby's locations, but did not provide an exact figure.

In a bright spot, the company lifted its quarterly dividend to 2 cents from 1.5 cents. The dividend will be paid on Dec. 15 to shareholders of record on Dec. 1. Wendy's/Arby's also said it will buy back an additional $170 million shares and extended its repurchase program by one year to Jan. 1, 2012. The new buyback is in addition to a buyback for $80 million shares.

Wendy's/Arby's has more than 10,000 restaurants in the U.S.. And 24 countries and U.S. territories worldwide.