Wendy's/Arby's Group loses money in 1st quarter

ATLANTA -- Wendy's/Arby's Group Inc. lost money in its first quarter as its Arby's locations struggled to hit the right note with customers and one-time charges pressured results.

After failing to gain traction with its $5 meal deals, Arby's began testing a dollar menu last year before expanding it to its 3,700 locations in April. The menu includes a small roast beef or chicken sandwich as well as curly fries.

But the Atlanta company's first quarter ended in early April -- before the chain could record much of the benefit from the heavily advertised menu.

Revenue at Arby's restaurants fell 12 percent in the quarter.

The lackluster Arby's showing weighed on overall results, as the owner of Wendy's and Arby's restaurants said Thursday that it lost $3.4 million, or a penny per share, for the three months ended April 4. That compares with a loss of $10.9 million, or 2 cents per share, last year.

Removing 3 cents per share in charges, profit was 2 cents per share.

Total revenue fell 3 percent to $837.4 million from $864 million.

Wall Street expected the Atlanta company to earn 1 cent per share on revenue of $835.2 million. The estimates of analysts surveyed by Thomson Reuters generally exclude one-time items.

Shares fell 21 cents, or 4.1 percent, to $4.88 in premarket trading.

Wendy's/Arby's Group has been trying to turnaround its Arby's results since late January, when CEO Roland Smith stepped in as interim president. Hala Moddelmog will take over the role permanently next week.

Arby's still has some work to do, as revenue at its North American company-run restaurants open at least a year dropped 11.6 percent in the quarter, while results for its franchised locations slid 11.4 percent.

Smith said Arby's plans to roll out a Steakhouse sub and Prime Cut chicken sandwich in the second quarter while continuing to push the its dollar menu.

Some other fast-food chains have also adopted this approach of late, as customers becoming more confident in economic conditions are beginning to eat out more, while others remain cautious and seek out cheap eats.

Things are looking much better at Wendy's locations, as revenue at those restaurants improved to $584.7 million from $578.2 million. The chain posted a slight increase in revenue at North American company-run restaurants open at least a year as well as its franchised locations.

The company maintained that sales at Wendy's restaurants open at least a year will rise in 2010 and that Arby's results will fall. This figure is a key indicator of a restaurant operator's performance because it measures results at existing restaurants rather than newly opened ones.

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