Sale Talk Heats Up Wendy's

Shares of the burger chain surge after it says it's exploring strategic options.
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Wendy's

(WEN) - Get Report

is chewing over the prospect of a company sale.

Shares of the burger chain surged nearly 12% late Wednesday after the company said it is exploring strategic options. It also posted first-quarter results that were above Wall Street's estimates.

Wendy's said it is evaluating moves such as revisions to its strategic plan, changes to its capital structure, a possible sale or a merger. Chairman James Pickett will lead a board committee exploring the various moves.

Wendy's, the No. 3 burger maker behind

McDonald's

(MCD) - Get Report

and

Burger King

(BKC)

, spent much of last year battling declining same-store sales and a proxy fight waged by billionaire investor Nelson Peltz. The company has since launched a series of strategic moves aimed at revitalizing its restaurants and its stock price, including the spinoff of Canadian doughnut chain

Tim Hortons

(TMI)

, the sale of Mexican chain Baja Fresh and a big stock buyback.

"The company has made progress executing its strategic plan," Pickett said in a statement Wednesday. "The board's formation of the special committee is a positive step in Wendy's continuing efforts to further enhance value for its shareholders, franchisees and other stakeholders."

For the first quarter, Wendy's earned $14.7 million, or 15 cents a share, down from $51.2 million, or 45 cents a share, a year ago. Analysts polled by Thomson Financial projected earnings of 13 cents a share.

Revenue rose 2% to $590.2 million. Same-store sales, or sales at restaurants open at least a year, increased 3.8% for U.S. company-operated restaurants and 3.7% for U.S. franchise restaurants.

Wendy's reiterated its prior guidance for 2007 earnings of $1.26 to $1.32 a share. Wall Street expects earnings of $1.27 a share.

Wendy's said it expects rising commodity prices, driven by demand for ethanol, will result in higher-than-expected food costs for the balance of the year, specifically, produce and chicken.

"We are working on many initiatives to offset rising costs, as we focus on improving margins at every restaurant in the Wendy's system," said CEO Kerrii Anderson. "We are confident our initiatives to drive sales, reduce store-level management labor and improve service times will result in profit growth in the second half."

Shares were up $3.82 to $36.50 in after-hours trading.