Wendy's Sees 10-13% EPS Growth in '05

Wendy's International Inc. (WEN), the No. 3 U.S. hamburger chain, Thursday forecast a 10 percent to 13 percent increase in 2005 earnings per share.

The company also targeted a long-term earnings per share growth rate of 11 percent to 13 percent.

For 2005, the company forecast earnings of $2.17 to $2.23 a share, up from $1.97 in 2004, a figure that is adjusted for the expensing of stock options.

In a meeting with analysts, Wendy's also forecast an 8 percent to 9 percent rise in revenue in 2005. The company also said it would stop providing monthly same-store sales updates after the first quarter.

For the year, Wendy's forecast a 3 percent to 4 percent increase in same-store sales at both its company-owned and its franchised namesake restaurants in the United States.

On Wednesday, the company reported a quarterly loss, reversing a year-ago profit, after taking a $190 million impairment charge for its struggling Baja Fresh (search) chain.

The company posted a loss of $135.7 million, or $1.20 per share, for the fourth quarter ended Jan. 2, compared with a profit of $64.7 million, or 56 cents per share, a year ago.

Excluding both the Baja Fresh charge and the expected impact from the accounting change, Wendy's had a profit of 44 cents per share for the quarter. On that basis, analysts, on average, expected 45 cents. Wendy's itself had forecast a profit of between 43 cents and 46 cents per share.

Sales at company-owned hamburger restaurants open at least 15 months fell 4.3 percent as the chain has struggled in recent months with stepped-up competition from rivals McDonald's Corp. (MCD) and Burger King Corp (search). Same-store sales, a key retail measure, fell 4 percent at U.S. franchised restaurants.

Both McDonald's and Burger King in the last year have revamped their menus with items like meal-sized salads, helping to boost their sales. The moves have also lured customers away from Wendy's, which already sold salads.

In a bid to revitalize sales, Wendy's in recent months added fresh fruit to its menu, pulled its unpopular "Mr. Wendy" advertising campaign, and began allowing customers to forego French fries in combination meals in favor of chili, a baked potato or salad.

Wendy's said higher prices on key ingredients like beef and tomatoes, increases legal reserves, and expenses for closing several Baja Fresh restaurants also weighed on results.

In addition to difficulties at its flagship chain, Wendy's has also been hard-hit by slower sales increases at so-called fast casual restaurants like Baja Fresh, which sell gourmet-style fare at or near fast-food prices. As a result, Wendy's said in November it would record a large write-down to reduce the asset value of Baja Fresh restaurants in Chicago, Columbus, and Nashville.

Baja Fresh, a Mexican-style chain, has been well-received in both California and in Eastern U.S. markets like Washington and Baltimore, Wendy's has said, but sales have been slower in other parts of the country.