Wendy's/Arby's Group (NYSE: WEN), a fast-food company that competes with McDonald's Corporation (NYSE: MCD), Burger King (NYSE: BKC), and Yum! Brands (NYSE: YUM), reported earnings for the fourth quarter on Monday. Call me unimpressed.
The chain earned $0.05 per share on an adjusted basis. According to this article, the results matched expectations. I don't begrudge Wendy's/Arby's for doing that in such a tough marketplace. But I do begrudge the weakness in the Arby's brand. Systemwide same-store sales at Wendy's were up 3.7% in Q4, while systemwide comps at Arby's were down a terrible 8.5%. Arby's is having problems attracting people with its current menu portfolio. The value menu at Wendy's, on the other hand, seems to be a strategy that is working. Customers are coming in, ready to get a deal on those delicious, although not-so-healthy, square-shaped burgers. So, if the company wants to improve its situation, it's going to have to get serious about fixing Arby's.
I think Wendy's/Arby's is going to have a difficult time going forward with this merger. At least in the short-term. I can't see why anyone would fool around with the stock when better alternatives like McDonald's are available. Management will find it difficult to properly invest in solid marketing efforts for Arby's, given the very tough economic conditions. And since consumers are becoming more value-conscious than ever before, the higher price scheme at Arby's isn't going to offer any incentive for them to make a visit. On a day when the Dow has plunged below a very critical/psychological level, I would be hard-pressed to offer any logical reason to consider Wendy's/Arby's as an idea worthy of further consideration. Check with me when the bear market is over, we might be able to talk about the company at that point... but not now...
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
3-02-2009 @ 5:58PM
Iridium said...
Well Arby's bought Wendy's so they must be doing alright. It isn't a straight merger.
Perhaps the writedowns from the merger caused Arby's profits to slip.
Wendy's was doing terrible in the market. Which is why they trashed thier last advertising campaign.