Stripped-down Wendy's reveals stripped down performance


After completing the sale of Tim Hortons and Baja Fresh Mexican Grill, Wendy's International (NYSE:WEN)'s fourth quarter 2006 report revealed a business struggling to recapture core market share, while rivals Burger King and McDonalds report strong performances for the same period.

Wendy's revenue compared to the same quarter '05 was down slightly, from $602.5 million to $596.4 million, but earnings took a dramatic tumble from $30 million to $3.1 million. Much of the drop is attributable to changes brought about by the spin-off of the doughnut and Mexican food companies.

Per-share earnings fell from $.25 (skewed last year by the Tim Horton sale) to $.03. Adjusted EBITDA from continuing operations was down to $38.4 million in the fourth quarter of 2006 from $46.0 million the previous year.



Wendy's stock dropped 2.1% on Friday, closing at $33.11. Wendy's Board voted to pay a $.085 quarterly dividend for the quarter, the 116th consecutive dividend.

Looking hard for a positive note, I noted store margins at company-owned locations rose from 7.7% to 8.4%.

Among the company's plans for the near future to improve profitability are completion of the planned spin-off of Café Express and continued testing of a breakfast menu. It also has announced the move of their advertising account to Saatchi & Saatchi, so look for changes in its marketing message. If only it could bring Dave Thomas back from the dead...

Also check out some other earnings reports that we're following, and let us know what you're expecting.

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