DUBLIN, Ohio - The Wendy's Co. returned to a first-quarter profit as it recorded a large gain on the sale of an investment. But the fast food chain's results missed Wall Street expectations and it cut its forecast for the year, citing higher costs for ingredients and softer-than-expected sales.
Wendy's stock dropped more than 3 per cent in premarket trading.
The Dublin, Ohio-based company also noted that it is in a "transition year" under new management and is investing heavily in updating its restaurants and introducing new menu items.
Wendy's said Tuesday that it now expects adjusted earnings from continuing operations in a range of $320 million to $335 million, down from its previous forecast of $335 million to $345 million.
For the period ended April 1, Wendy's said its net income amounted to $12.4 million, or 3 cents per share, versus a net loss of $1.4 million, or breakeven results, a year ago.
Excluding one-time items, earnings were 1 cent per share, which was lower than the 3 cents per share analysts were expecting, according to FactSet.
Revenue rose 2 per cent to $593.2 million from $582.5 million. That also fell short of Wall Street's estimate for revenue of $608.1 million.
Revenue at company-run restaurants in North America open at least 15 months and renovated restaurants reopened at least three months climbed 0.8 per cent in the quarter. The figure increased 0.7 per cent for franchise restaurants.
Wendy's said its company-run restaurant margin fell as a result of higher costs for ingredients, particularly for fresh beef. The promotion of the "W'' cheeseburger also ate into margins.
Since Wendy's sold Arby's to a private equity firm last summer, the company has been on a mission to improve its namesake restaurants and revamp its image as a higher-end burger chain
CEO Emil Brolick, who was hired last year, has been focusing on quality ingredients, improving customer service and remodeling restaurants.
Wendy's said its outlook for 2012 excludes items such as anticipated debt extinguishment costs, and relocation costs and other expenses from the consolidation of the Atlanta restaurant support centre with the Dublin restaurant support centre.
Wendy's had 6,581 restaurants at quarter's end.
Its shares fell 15 cents, or 3.1 per cent, to $4.72 per share in premarket trading on Tuesday. Its shares have traded in a 52-week range of $4.29 to $5.62.