Third Quarter Highlights
"We had another outstanding quarter at both Wendy's and Tim Hortons," said Chairman, CEO and President Gordon F. Teter. "We strengthened our quality brand position with customers. Our top-line growth was exceptional due to a focus on maintaining consistent store-level operations, the continued rollout of our Service Excellence(TM) program at Wendy's, balanced marketing and quality products.
"Additionally, we effectively controlled general and administrative costs and we expanded Wendy's domestic margins with the strong sales performance and programs to significantly improve store-level productivity."
The Company repurchased 2.1 million common shares for $58.8 million during the quarter. Since the beginning of the repurchase program in 1998 through October 3, 1999, the Company repurchased a total of 13.9 million shares for $337 million. The Company's total share repurchase authorization is up to $600 million.
Wendy's domestic margins expanded by 40 basis points during the quarter, despite higher food costs and labor inflation, and are up 130 basis points year to date, from 15.5% a year ago to 16.8%. The Company is effectively leveraging strong same-store sales at Wendy's and executing several store-level productivity programs.
The Company continues to focus nearly all new store development capital on Wendy's in North America and Tim Hortons in Canada, where the Company achieves the highest returns. The Company expects to open about 520 new units systemwide during 1999, up approximately 13% compared to 460 a year ago.
The Company acquired from a franchisee 21 Wendy's stores in Argentina and is now operating the market as part of its Latin America/Caribbean region.
Early in the fourth quarter, the Company advanced its plan to improve corporate profitability and return on capital by closing seven company operated Wendy's in the United Kingdom. The underperforming units were closed due to high real estate and operating costs.
The Company's strong performance continues in the fourth quarter, with same-store sales during October up about 8.5% at both Wendy's U.S. and Tim Hortons in Canada.
Wendy's marketing program during the fourth quarter includes a balance of the current national promotion for the Bacon Mushroom Melt(TM) hamburger, an upcoming national pillar highlighting the popular Spicy Chicken (TM) sandwich,special cable and print advertising targeting core hamburger consumers and a Kids' Meal(TM) promotion featuring Snoopy. Tim Hortons marketing in the fourth quarter features its core coffee products.
The Company's year 2000 goal and long-term goal for base EPS growth continues to be in the 12% to 15% range. For the year 2000, the earnings goal includes continued same-store sales growth at Wendy's and Tim Hortons, new store development of at least 525 units systemwide, margin expansion at domestic Wendy's, store-level productivity gains, effective control of general and administrative costs, and share repurchase.
"Looking at the year 2000, we are optimistic that our momentum will continue," said Reed. "Overall consumer spending trends are positive, traffic growth in the quick-service restaurant industry is strong and demand continues to outpace new store supply. Most importantly, we are intent on maintaining a disciplined, long-term approach to managing the business, our brands and our balance sheet."
The Board of Directors recently approved a quarterly dividend of 6 cents per share, payable on November 30 to shareholders of record as of November 15. It will be the Company's 87th consecutive dividend payment to shareholders.
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