Current Progressive Cattle digital edition

Another fast food chain raising prices for beef

Christina Rexrode, The Associated Press Published on 11 May 2011

 Wendy's/Arby's Group Inc. plans to raise menu prices, the latest in a stream of companies saying they will pass along higher costs for the ingredients in their products.

The fast-food giant on Tuesday blamed the rising prices of beef, bacon and cooking oil. It also said it had already raised prices late last year and in March.

The announcement came on the same day that the company reported that it lost $1.4 million in the first quarter and lowered its earnings estimate for the year.

Wendy's/Arby's has struggled through the recession and the economy's halting recovery, losing money for seven of the 10 quarters since the two chains combined in a deal engineered by billionaire investor Nelson Peltz in 2008.

Its leaders have a formidable to-do list. Besides stemming losses and raising prices without upsetting customers, they also need to get a piece of the breakfast action that is benefiting their rivals. And that's on top of selling off the Arby's chain, which represents more than 30 percent of revenue.

Wendy's/Arby's also blamed the rising beef costs for its decision to lower its predictions for adjusted earnings for the year, to between $330 million and $340 million. In March it had said it expected to make $345 million to $355 million.

Chief Financial Officer Steve Hare said the company expected a 20 percent increase in the price it pays for meat, up from previous predictions of 10 to 15 percent.

Wendy's/Arby's net loss of $1.4 million, or break-even per share, was narrower than the loss of $3.4 million, or 1 cent per share, in the same quarter last year.

Excluding a charge, the most recent quarter's earnings were 1 cent per share. Analysts had expected 2 cents per share.

The company has already factored Arby's sale into its 2011 earnings predictions. CEO Roland Smith tipped his hand slightly on deal news, telling analysts there are "several quality bidders" and that they have all done "significant due diligence." end_mark