Industry News | November 12, 2008
The Drive-Thru on Wall Street
No. 3 burger chain Wendy’s reported its final quarter independent from Arby’s on November 6. The merger pushed the chain into the red with a $30.8 million loss, specifically attributed to special committee expenses and restructuring spending adding up to $68.5 million.
Total sales for the chain weren’t much better, falling 1.2 percent to $548.1 million at company-owned units. To save the weakening company, Wendy’s/Arby’s CEO Ronald Smith plans to reduce overhead by $60 million and consider co-branded units outside the U.S.
Although Burger King fared better, its Q1 results didn’t meet analysts’ expectations on October 31. The company’s net income for the quarter rose to $52 million or $0.38 per share, but analysts expected the company to earn $0.39 per share. So while it was a $3 million increase from the same quarter a year before, it wasn’t enough.
Ultimately, it’s the brands that best leverage their international operations that are managing to stay afloat. Yum! Brands, for example, experienced worldwide system sales growth of 10 percent thanks to its international growth during its third quarter. In mainland China alone, the brand saw unit growth of 21 percent and a 5 percent increase in same-store sales in the country.
Along with Yum, McDonald’s also saw strong performances abroad last month. Same-store sales grew 11.5 percent in the Asia-Pacific, Middle East, and Africa region, dwarfing the 5.3 percent growth posted domestically.
And finally there’s Starbucks which has been experiencing a financial free fall over the last year. The company posted a mind-boggling 97 percent decrease in profits for the its fourth quarter, falling from a net income of $158.5 million a year ago to just $5.4 million yesterday.
Starbucks’ troubles began long before Wall Street fell or the bailout passed, but its potential recovery is made even tougher by the tough economic times.
By the looks of the top chains’ financial earnings, the increasing number of U.S. customers trading down to quick-serves will not be enough to keep companies in the black. Chains that are able to grow their international operations and keep U.S. costs down will weather the storm.
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