NEW YORK, N.Y. – Wendy’s third-quarter loss narrowed as more customers snapped up its new Pretzel Bacon Cheeseburger and Pretzel Pub Chicken sandwiches, along with other menu items.
Results beat expectations and the company raised its guidance Thursday.
However, the company said it expects adjusted earnings, before taxes, interest, and other items, to fall 10 per cent in the fourth quarter, as it invests in future growth initiatives.
Shares fell 13 per cent in morning trading, retreating from a five-year high on Wednesday.
Fast-food companies have been facing tough competition from chains such as Chipotle, which have a more upscale image and the ability to charge higher prices for their food.
In response, Wendy’s Co. has been offering new items such as more premium buns. On Thursday the chain said it is bringing back its Bacon Portabella Melt and serving it on a toasted brioche bun. Wendy’s is also pushing renovations to make its restaurants more inviting.
Wendy’s CEO Emil Brolick said the strategy is “proving to be effective” against both its traditional quick-serve restaurant competitors and new entrants.
While the Pretzel Bacon Cheeseburger did well during the quarter, another new product, a grilled chicken flatbread, did not do as well as expected and sales momentum slowed at the end of the quarter, Brolick said.
The company, based in Dublin, Ohio, says sales rose 3.2 per cent at restaurants open at least a year, a key retail metric.
For the quarter, Wendy’s net loss totalled $1.9 million, or break even per share, compared with a loss of $26.2 million, or 7 cents per share last year. Excluding costs related to paying back debt early and selling some restaurants, net income was 8 cents per share.
That’s two cents better than Wall Street had expected. Revenue edged up nearly 1 per cent to $640.8 million, which was also better than most analysts had projected.
Janney Capital Markets analyst Mark Kalinowski said Wendy’s will generally continue to rise as it’s “a cut above” brand positioning resonates and more stores are remodeled.
The company now expects adjusted earnings of 25 cent per share for fiscal 2013, from prior guidance of 20 to 22 cents per share. Analysts had expected 23 cents per share.
Shares fell $1.20, or 13.2 per cent, to $7.89 during midday trading. The stock has nearly doubled since the beginning of the year, up 93 per cent.