Wendy’s, the US burger chain, has reported a 90% drop in fourth-quarter net income from $30m (£15.3m) last year to $3m, which it said reflected the loss of profits from Tim Hortons, one of the chains it divested under intense pressure from shareholders.
For the quarter to 31 December 2006, the company said that revenues fell 1% to $596.4m, while franchise revenue dropped 20%.
The group also invested $5.7m in research and development expenses during the quarter for its namesake chain’s planned rollout of breakfast, which is currently being tested in about 150 of its restaurants.
Restaurant sales increased 2.2% to $526.7m. Fourth-quarter same-store sales increased 3.1% at domestic corporate restaurants and rose 2.7% at US-based franchised units.
The company said that its fourth quarter 2005 figures had included results from Tim Hortons, Baja Fresh and other discontinued operations, which contributed about $3.9m to net income.
In the last three months of 2006, discontinued operations resulted in a $6.9m loss, mostly from Baja Fresh.
The group said that other negative factors contributing to the fourth quarter decline in net income included a drop in franchisee rental income and reduced gains on sales of properties. In addition, it spent $7.9m in restructuring and severance charges during the quarter.
For the year, the company reported profits of $94.3m, compared with $224.1m a year earlier. Revenues dropped 0.7% to $2.44bn. Same-store sales increased 0.8% at US corporate units and 0.6% at US franchised restaurants. The company finished the year with seven consecutive months of positive same-store sales.
Kerrii B. Anderson, chief executive, said: "We ended 2006 with strong momentum, positive same-store sales and significantly reduced costs
"We intend to build on this momentum and drive even stronger results in 2007 and beyond, as we examine every facet of our business for improvement."
