May 10, 2017 / 11:44 AM / 3 months ago

Value meals drive Wendy's profit, sales beat; shares soar

3 Min Read

FILE PHOTO: A Wendy's sign and logo are shown at one of the company's restaurant in Encinitas, California May 10, 2016 .Mike Blake/File Photo

(Reuters) - Wendy's Co (WEN.O) reported quarterly same-restaurant sales and profit that topped estimates, driven by the popularity of its value meals and lower costs, sending its shares to their highest in nearly a decade in morning trading on Wednesday.

The U.S. burger chain has been promoting its value meals such as "4 for $4" to attract diners, as grocery prices have fallen in recent months, encouraging more people to cook at home.

Wendy's in January added the Double Stack cheeseburger, which includes a burger, chicken nuggets, a small serving of fries and a drink, to its "4 for $4" value meals.

The company brought back its popular North Pacific Cod sandwich and also promoted its Ranch Chicken Club sandwich more in the first quarter, which helped push up same-restaurant sales to 1.6 percent, beating the 1.1 percent growth expected by analysts polled by research firm Consensus Metrix.

Consumers continue to spend less and save more despite higher discretionary income, leading Wendy's and rivals to increase promotions on their value offerings, Wendy's Chief Financial Officer Gunther Plosch said on a conference call.

The company said it did not see any material impact from McDonald's Corp (MCD.N) testing "Quarter Pounder" hamburgers made with fresh beef in Dallas.

McDonald's announced the test in March, a move that was expected to give competition to Wendy's promise of "fresh never frozen beef", but would require restaurant operators to make changes to cooking routines that could slow service.

Wendy's said it would continue to offer more value-oriented products such as its 50 cent Frosty.

General and administrative expenses fell 19 percent to $52.4 million in the first quarter ended April 2, due to lower professional fees, lesser incentive compensation payout and as the company sold more restaurants to franchisees.

Net income fell to $22.3 million from $25.4 million in the quarter.

On a per share basis, the company's profit remained unchanged at 9 cents per share, due to fewer outstanding shares from a year earlier.

Revenue fell 24.5 percent to $285.8 million from a year earlier, mainly because the company sold more restaurants to franchisees.

Analysts on average had expected earnings of 8 cents per share on revenue of $282.6 million, according to Thomson Reuters I/B/E/S.

Wendy's shares rose as much as 6.8 percent to $16.12 in morning trading on Wednesday. Up to Tuesday's close, the stock has risen about 12 percent since the start of the year.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Martina D'Couto

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