Wendy's Reports Drop in Profit

The company cites higher taxes and stronger competition.
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Wendy's International

(WEN) - Get Report

posted a drop in second-quarter net income, citing higher taxes and stronger competition.

The fast-food chain said net profit fell 4.1% to $61.1 million, or 53 cents a share, in line with estimates, from $63.7 million, or 54 cents, in the year-ago period. Revenue rose 14.9% to $786 million from $684 million a year earlier.

Wendy's said its tax rate for the period rose to 39.2% from 36% in the first quarter. Without the increase, the chain operator would have earned 56 cents a share, a 3.7% increase over the previous year.

"Factors such as rising unemployment, low consumer confidence and high gasoline prices are still challenging," said Chairman and Chief Executive Jack Schuessler.

But Chief Financial Officer Kerrii Anderson was more optimistic: "We expect business trends to improve in the second half ... with more competitive advantages in restaurant operations and excellent product and marketing plans."

Wendy's reiterated its lowered earnings per share projection for 2003, calling for EPS of $1.97 to $2.02 per share. Analysts were expecting profit of $1.97 on a per-share basis. Initially, the company had forecast earnings between $2.02 and $2.08 a share.

The company also announced its quarterly dividend of 6 cents a share, payable Aug. 18 to shareholders on record as of Aug. 4.

Wendy's shares were down 51 cents, or 1.8%, at $28.14 in afternoon trading Thursday.