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Wendy's/Arby's earns $14.7 million in 3Q

Dollar drinks, sandwiches and desserts will join more Arby's menus as the struggling fast-food chain jumps on the deep-discount bandwagon aimed at wooing customers who have fled its higher-priced meals.
/ Source: The Associated Press

Dollar drinks, sandwiches and desserts will join more Arby's menus as the struggling fast-food chain jumps on the deep-discount bandwagon aimed at wooing customers who have fled its higher-priced meals.

The plan is a bid to boost sagging sales at the chain that led its parent company, Wendy's/Arby's Group Inc. on Thursday to post only a thin profit for the third quarter.

The fast-food chain is already trying to attract customers with its $5 combo meals for certain roast beef sandwiches. But executives said Thursday that they'll make a newly developed $1 menu more widely available in hopes of improving performance at the chain.

The menu, which includes chicken, ham and cheese, and small roast beef sandwiches, has been in testing for 10 months, mostly in the Southeast.

Arby's, owned along with Wendy's by Wendy's/Arby's Group Inc., saw revenue slide nearly 7 percent during the third quarter. Meanwhile, sales in restaurants open at least a year sank 9 percent because fewer customers gulped down its sandwiches and shakes. The figure is an important restaurant performance measure.

The poor results continued into October, after the quarter ended.

Wendy's and its cheaper menu fared better than its higher-priced sibling, with flat sales in sites open at least a year.

Although executives hinted that they plan a massive expansion to Wendy's deeply discounted offerings next year as well.

"It's not just one product. It's a strategy," CEO Roland Smith told investors during a conference call. "It's a way for customers to look at our menu."

Fast-food restaurants were among the early winners of the recession as diners swapped price restaurants for the cheaper eateries. But now, customers are spending less as restaurants race to slash prices, or staying home entirely. That dragged down business at the nation's fast food chains by 3 percent this summer, according to a recent report from a market research firm NPD Group.

Morningstar analyst R.J. Hottovy said he thinks the dollar menu is a necessity for Arby's if it hopes to compete with the likes of bigger rivals McDonald's Corp. and Burger King Corp., which just launched its own $1 double cheeseburger.

"I think it's a sign of the time," he said.

For the three months that ended Sept. 27, Wendy's/Arby's earned $14.7 million, or 3 cents per share. That figure included a 3 cents per share charge related to last year's merger. Revenue was $903.2 million.

The company was formed last September when Arby's owner Triarc Cos. Inc. bought Wendy's in an all-stock deal valued at $2.34 billion.

Because of the merger, it's difficult to compare third-quarter results to the same figures last year.

Analysts expected the restaurant company, based in Atlanta, to earn 6 cents per share on revenue of $916.5 million.

"Arby's, however, continues to be a drag on the business and there are no signs yet of any real change in trend," Bernstein analyst Sara Senatore told investors in a research note. "While management is optimistic that trends will improve, persistent weakness in October clearly implies sluggish demand."

Its shares rose 14 cents, or 3.5 percent, to $4.30 in afternoon trading Thursday.