Wendy's reports expense-cutting plan

Wendy's (WEN) reported plans Thursday to cut expenses by up to $30 million as the fast food giant copes with record high beef prices and higher costs from the federal Affordable Care Act.

The company said it expects to achieve the efficiencies primarily by realigning its U.S. field operations, exacting savings at its restaurant support center in Dublin, Ohio, and completing the previously announced sale of 135 Canadian company-operated restaurants.

The realignment is expected to cost up to $25 million, and is forecast to achieve some of the savings this year, with the full impact coming in 2015, the company said.

Wendy's disclosed news of the plan as it reported a third-quarter net profit of $22.8 million, or 6 cents a share. The result compared with a loss of $1.9 million, or roughly break-even per share, for the July-Sept. period of 2013.

Adjusted third-quarter earnings per share were 8 cents, the same as last year's third quarter. That fell below the 9 cents per share consensus forecast of financial analysts surveyed by Thomson Financial Network.

Consolidated third-quarter revenues totaled $512.5 million, a 20% drop from the $640.8 million Wendy's reported for the same period of 2013. Wall Street analysts had expected $514.7 million in revenues.

Wendy's reported a 2% increase in same-restaurant sales during the quarter, lower than both analysts' forecasts and the company's expectations. But the company reiterated its full-year earnings guidance for 2014 and announced a 10% increase in its quarterly cash dividend rate, from $0.05 to $0.055 per share.

Wendy's shares were up fractionally at $8.10 in Thursday afternoon trading.

Wendy's President and CEO Emil Brolick characterized the July-Sept. period as "challenging" in a statement issued with the earnings results.

"Our expectations for the third quarter included a 20% year-over-year revenue decline from the sale of company operated restaurants to franchisees," said Brolick. "We also absorbed beef costs that were much higher than or initial projections."

Even with the expected savings from the company's cost-cutting plan, he characterized the future outlook as similarly challenging.

"As we look to 2015 and beyond, we anticipate that wage inflation and the implementation of the Affordable Care Act will add cost pressure to our cost structure," said Brolick. "In addition, we anticipate that the record-high beef costs we are currently facing will continue."