MCD McDonalds Corp

By Julie Jargon and Joshua Jamerson 

Wendy's Co. reported fourth-quarter profit that beat expectations by operating fewer of its own restaurants and by offering meals for $4.

Wendy's said it expects same-store sales growth in 2016 of about 3% in North America, above the projection of 2.5% by analysts surveyed by Consensus Metrix. The company also projected adjusted per-share earnings between 35 cents and 37 cents, in-line with the consensus view of 36 cents by analysts polled by Thomson Reuters.

Like many other restaurant chains, including McDonald's Corp. and Burger King, a unit of Restaurant Brands International Inc., Wendy's has sought a more stable cash flow and higher profits by selling its company-owned restaurants to franchisees. Wendy's cited its reduced ownership of restaurants as a reason for its higher results in the quarter and said it plans to sell about 315 more restaurants during 2016.

Wendy's has moved from having 78% of its restaurants owned by franchisees to 85%, and plans to have 95% of its restaurants franchised this year.

Wendy's could be entirely franchise-owned in the next two to three years, RBC Capital Markets analyst David Palmer said in a research note. He added that Wendy's will start opening net new restaurants this year after a decade of contraction, with net unit growth of at least 3% by 2020.

Wendy's said same-restaurant sales at North American restaurants rose 4.8% in the quarter and 4.9% at its franchise-operated locations, the best quarterly performance in four years. The Consensus Metrix projection was for 3.1% growth at franchised restaurants.

Wendy's shares fell 2.7% to $9.88 in recent trading.

The Dublin, Ohio, company's new "4 for $4" meal, introduced nationwide in mid-October, helped boost sales in the quarter.

Chief Executive Emil Brolick, speaking at Wendy's annual investor day meeting on Tuesday, said the bundled meal "is not just about a good price point, it's about value as well. No one has ever won a price war but you can win a value war."

Mr. Brolick in October announced plans to retire in May. He will be succeeded by Chief Financial Officer Todd Penegor. Wendy's is conducting an outside search for a new CFO.

Wendy's and other chains previously struggled to come up with a value offering that would resonate with customers. McDonald's last month launched a new value meal that allows customers to pick two menu items for a total of $2. Other rivals have copied Wendy's $4 price point, including Burger King with its "5 for $4" meal and CKE Restaurants Inc.'s Hardee's and Carl's Jr. chains with their "$4 Real Deal."

Wendy's posted earnings of $85.9 million, or 31 cents a share, compared with a year-earlier profit of $23.3 million, or 6 cents a share. Excluding certain items, earnings from continuing operations were 12 cents a share, up from 8 cents a year earlier.

Analysts, on average, had expected 11 cents a share, according to Thomson Reuters.

Revenue slipped 4.7% to $464.4 million, largely because of the ownership of 363 fewer company-operated restaurants in the period. Analysts had forecast $456 million in revenue.

Write to Julie Jargon at julie.jargon@wsj.com and Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

February 09, 2016 10:25 ET (15:25 GMT)

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