Wendy's International Inc is exploring a possible sale of the company, the third-largest US hamburger chain said on Monday, as it warned that profits for the year would fall short of Wall Street expectations.
"While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination," James Pickett, Wendy's chairman and head of special committee doing the study, said in a statement.
The company, under pressure from shareholders, formed a committee in April to determine how to boost its stock price, including a possible sale. JP Morgan, as lead adviser, and Lehman Brothers Inc, as co-adviser, will conduct a review in conjunction with the committee.
A sale would cap a whirlwind year for the company, which has spun off its Tim Hortons coffee-and-donut chain, dumped its money-losing Baja Fresh Mexican Grill and laid off employees at its corporate office.
The company said that there is no assurance that a deal will be completed.
Billionaire investor Nelson Peltz's Trian Partners, which owns a big chunk of Wendy's stock, has pushed the company to make changes to boost its shares. Peltz captured three seats on the board in March last year. His company, Triarc Cos, controls fast-food chain Arby's.
Wendy's said it expects to make US$1.09 to US$1.23 per share for the year, primarily because of weaker-than-expected sales at stores open at least a year, considered a key indicator of a retailer's strength and higher-than-expected commodity costs.
The company withdrew its earnings forecasts for next year and 2009. Analysts surveyed by Thomson Financial expected earnings of US$1.27 per share this year and a US$1.70 next year.
Wendy's said same-store stores are up just 0.7 percent in the second quarter through Friday compared with 3.8 percent in the first quarter.
Kerrii Anderson, Wendy's chief executive and president, said sales in the last two months have been hurt because Wendy's had to raise prices.
"We believe our new market-based pricing approach is the right long-term strategy to generate more positive store operating margins, but it has pressured transactions in the short-term," she said.
The revised earnings outlook for this year excludes expenses related to the work of the committee; as much as US$60 million from changes to the company pension program; and also potential restructuring charges.
Wendy's shares fell 3.2 percent, or US$1.26, to US$38.47 in trading on Monday afternoon. Shares have been trading at approximately US$40 since it announced in April that a committee had been formed to study options for the company. Shares reached as high as US$67.19 last year just before the Tim Hortons spinoff.
Wendy's, based in the Columbus suburb of Dublin, operates about 6,600 restaurants in the US and abroad. It trails McDonald's Corp and Burger King Holdings Inc in the burger business.
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