Wendy’s International, Inc. (NYSE: WEN) announced today its results for the second quarter and first half of the year, which ended on July 2, 2000. Sales growth in the Company’s core businesses, particularly at Tim Hortons®, drove stronger than expected earnings performance for the quarter.
* Base EPS (total diluted EPS less asset gains) were $0.41 for the second
quarter, up 17% from the $0.35 reported a year ago.
* Total diluted EPS were $0.43, a 10% increase over $0.39 reported in the
same quarter a year ago. Total diluted EPS includes $0.02 in asset
gains in the quarter compared to $0.04 reported in the same quarter a
* Systemwide sales were up 8.6% to a record $2 billion for the quarter.
* Total revenues increased 7.8% to a record $570 million for the quarter.
Summary EPS Results:
2Q 2000 2Q 1999 Increase
Base EPS $0.41 $0.35 17%
Asset gains $0.02 $0.04 —
Total EPS $0.43 $0.39 10%
Following the strong performance and momentum, management is raising its Base EPS growth goal for 2000 to a range of 14% to 17%, up from a previous goal of 12% to 15%. Base EPS was $1.26 in 1999.
“The Company continues to deliver quality earnings growth above our stated goals,” said Jack Schuessler, CEO and president. “This was the sixth consecutive quarter in which Base EPS grew by at least 17%.
“We have momentum at Wendy’s® and Tim Hortons and continue to execute strategies to create shareholder value. Tim Hortons’ performance was especially strong in both Canada and the United States. The Tim Hortons team continues to produce superior results and contribute a greater portion of our revenue and earnings growth,” Schuessler added.
Same-store sales at Wendy’s U.S. company restaurants grew by 2.8% for the second quarter, on top of 8.3% a year ago, and are up 3.2% year to date. Domestic operating margins were 17.3% in the second quarter compared to 17.7% a year ago, reflecting a spike in food costs.
“Wendy’s performance at company and franchise stores was impressive considering the excellent sales growth we produced a year ago,” said Tom Mueller, president and CEO of Wendy’s North America. “We also faced intense price discounting by our competitors in the quick-service sandwich sector.”
“More importantly, we are optimistic about the second half of the year,” Mueller added. “The Mozzarella Chicken Supreme(TM) sandwich is our August national promotion. Other excellent product promotions and Kids’ Meal(TM) promotions are coming later this year. From an operations perspective, we continue to implement our Service Excellence® program, expand our late night program and integrate productivity initiatives in our restaurants.”
Same-store sales at Tim Hortons restaurants in Canada grew by 8.7% in the quarter, on top of a 10.9% increase during the same period a year ago. Same- store sales at Tim Hortons in the U.S. grew 11.8% in the quarter and have increased at double-digit rates for five consecutive quarters.
“We continue to deliver excellent results with our core coffee business, service initiatives, improved pick-up window performance and expansion of our lunch program,” said Paul House, president and CEO of Tim Hortons.
“Sales volumes at Tim Hortons stores in Canada have grown more than 38% in the past three years without price increases and our franchisees are producing another outstanding year,” House added. “We are very encouraged with our progress developing the Tim Hortons concept in the U.S. Sales volumes are increasing, customer acceptance of the brand is improving and we are making significant progress on our strategy to franchise our three U.S. markets in Ohio, Michigan and upper New York state.”
First Half highlights
* Base EPS (total diluted EPS less asset gains) for the first six months
of the year were $0.70, up from the $0.59 reported a year ago.
* Total diluted EPS were $0.73, up from $0.64 reported a year ago. Total
diluted EPS includes $0.03 in asset gains for the first half compared to
$0.05 a year ago.
* Systemwide sales were up 9.2% to a record $3.7 billion.
* Total revenues increased 8.4% to a record $1.1 billion.
New restaurant development on track, share repurchase continues
* The Company reported that it is on track to open about 520 new Wendy’s and Tim Hortons restaurants systemwide in 2000.
* Management continued its share repurchase program during the second
quarter, buying 680,300 common shares for $13.4 million. The Company
has purchased a total of 21.5 million common shares for $485 million
since the beginning of the program in 1998. The board of directors has
authorized a total of up to $600 million for share repurchase.
* The board of directors approved a quarterly dividend of $0.06 per share,
payable on August 25 to shareholders of record as of August 11. It will
be the Company’s 90th consecutive dividend payment to shareholders.
The Company also announced preliminary sales for Period 7, which ends on August 6. Same-store sales at Wendy’s U.S. company restaurants have increased in the 1% to 2% range, on top of a 6% increase during the same period a year ago. Same-store sales at Tim Hortons in Canada have increased in the 9% to 10% range, on top of a 14% improvement a year ago.