Wendy's/Arby's Group posts 2Q profit

Wendy's/Arby's Group Inc. said Thursday it plans to launch a premium bacon cheeseburger at its Wendy's chain in October, setting up a head-to-head battle with McDonald's Corp.'s new Angus burgers that became available nationwide this summer.

Wendy's top executive talked about the launch while discussing the company's improved second-quarter results released Thursday.

The launch of the cheeseburger, and its likely premium price tag that has yet to be disclosed, comes as the company's Arby's chain is continues to struggle in large part because of its more expensive menu items.

Cowen & Co. analyst Paul Westra called the decision to launch a more expensive burger "counterintuitive" because of the economy.

Still, President and CEO Raymond Smith defended the burger and its "juicier beef, improved bun (and) bacon cooked from scratch."

"Value is relative, and I don't think all value is defined by $1 price points," he told investors during a conference call.

The Atlanta-based company, the nation's third-largest fast food chain, was formed last September when Arby's owner Triarc Cos. Inc. acquired the Wendy's brand. Since then, Wendy's, with its cheaper menu items and massive store base, have consistently boosted results -- a trend that continued Thursday as the restaurant chain released second-quarter results.

For the three months that ended June 28, the company earned $14.9 million, or 3 cents per share. That compares with Triarc's year-ago loss of $6.9 million, or 7 cents per share.

But when comparing this quarter's results with how a merged Wendy's and Triarc would have performed had the two been a combined organization last year, profit climbed 3.8 percent.

Revenue was $912.7 million, nearly triple Triarc's revenue during the same period last year.

Analysts expected the company to earn 6 cents per share on revenue of $928.1 million. Those estimates typically exclude one-time items.

Wendy's systemwide same-store sales fell 0.4 percent, and Arby's fell 6.9 percent. Same-store sales are an important restaurant industry metric of sales in locations open at least a year.

Wendy's, the larger of the two sister fast-food chains, brought in $615.2 million in revenue in the quarter, down 2.6 percent from last year.

"This appears to us to be the turning point in the turnaround of the Wendy's brand," C.L. King & Associates. analyst Michael W. Gallo wrote in a research note. "The brand held its own in an extremely challenging and competitive environment."

But Arby's, despite incremental gains from the first quarter, continued to struggle as cash-strapped customers opted to spend money at cheaper eateries. To fight back, Arby's is promoting its own discount options -- such as its barbecue roastburger combo, which includes french fries and a drink for $5. Sales at the chain known for its roast beef sandwiches and seasoned curly fries fell 5 percent to $297.5 million.

Shares climbed 32 cents, or 6.7 percent, to $5.07 Thursday.