LOS ANGELES – Wendy's International Inc. (WEN) Thursday reported a 1 percent drop in quarterly earnings, beating Wall Street estimates, but lowered its profit outlook for the year on sluggish sales at its namesake restaurants and higher beef costs.
The No. 3 U.S. burger chain's shares rose over 3 percent in thin trade following the announcement.
Second-quarter net income was $70.8 million, or 61 cents per share, down from from $71.6 million, or 62 cents per share, a year ago.
Wall Street analysts on average had expected an adjusted profit of 57 cents a share, according to Reuters Estimates, w sales at its U.S. hamburger restaurants fell more than expected during the quarter, in part due to a woman's claim in March that she found a human finger in a bowl of Wendy's chili.
The woman, Anna Ayala (search), has since been charged with attempted grand theft because her claim caused Wendy's to lose revenue. She is scheduled to enter a plea later on Thursday.
In addition to the finger incident, Wendy's has been hard hit by revitalized sales at larger rivals McDonald's Corp. (MCD) and Burger King Corp (search).
Wendy's Baja Fresh (search) Mexican-style chain is also struggling with weaker sales, while its Canada-based Tim Hortons coffee shops are flourishing. Some Wendy's investors have called for the company to spin off Tim Hortons (search), but the company has repeatedly declined to comment on the suggestion.
For the full year, Wendy's said it expects to earn between $2.20 per share and $2.26 per share, below its previous forecast of $2.29 per share to $2.35 per share.
The revised forecast is in line with Wall Street analysts' average estimate of about $2.24 per share, according to Reuters Estimates.
Beef costs are expected to be 12 to 15 percent higher than last year, Wendy's said, versus a previous forecast for a rise of 6 to 9 percent.
The opening of the U.S. border to Canadian cattle is expected to result in lower beef prices in the fourth quarter, the company said.
Wendy's shares rose $1.73, or 3.8 percent, to $47 in after-hours trade on the Inet electronic brokerage.