Wendy's/Arby's Group (WEN)

WEN is currently under-priced, considering the value of the firm, especially compared to peers. Combined sales continue to experience strong growth. During the first 3Qs of 2009, WEN has achieved over $2.7 billion in sales vs. $1.8 for the entire 2008 period.

I like that they continue to attack their debt to get it lower to more favorable industry comps. Of course, the lurking risk is, if and when will WEN pay out a "special" dividend. I hope never. The debt load sand bagged any growth opportunity. Wen needed to increase CapX to update existing sites and begin in earnest to expand overseas.

Long term buy, There earnings are beginning to steady out, and will grow.

LONG TERM THIS WILL BE 20+ in 2010 beyond. Great buy at this level. 4k

Was able to ride the decline in WEN and closed out the position with the belief that even a dead cat will bounce but WEN is going from bad to worse.

The rest of ’09 and first quarter of ’10 are all about burgers for a buck. The obvious problem is the heavy fast food customer, young males, do not have the discretionary income or are not spending as much of their discretionary income as they did a few years ago. While the typical Arby’s (or Wendy’s) customer may not be the typical McDonald’s (McD) customer, a portion of the customer base overlaps with that of all fast food concepts. For the rest of this year, those customers who migrate among various fast food concepts are being drawn to McD and Burger King (BK). Specifically, McD has done everything right over the past few years and same-store-sales as well as the McD stock price have increased during that period. Now McD is struggling to keep the momentum (McCafe is not growing / driving as much traffic as was expected) and, as a result, have resorted to aggressively pushing 99 cent double cheeseburgers. Likewise, BK has entered the battle and is promoting 99 cent double cheeseburgers in an effort to hold onto market share. Wendy’s will ultimately have to participate in the burger war and Arby’s will continue to experience double digit same-store-sales declines since they lack a compelling value offer. Finally, there is seasonality in fast food (especially in colder, northern climates) and the first quarter of the calendar year is the slowest so things will get worse before they get better.

Same-store-sales declines = free cash flow squeeze. At an average-unit-volume (AUV) of $1.3 million, the typical Wendy’s will generate positive cash flow from restaurant operations if sales decline by 10% but obviously not as much free cash flow. Arby’s, on the other hand, has an AUV of slightly less than $900 thousand – uncomfortably close to break-even levels. When the double digit sales declines at Arby’s continue, the concept’s restaurant operations will be burning cash quickly. I say when sales decline because Arby’s is going to introduce a dollar menu. Currently, Arby’s has an average customer check in excess of $7.00 and the trade down effect from regular customers ordering from the dollar menu instead of their usual $6 Beef n Cheddar combo will cannibalize the overall sales. Make up for the lower average check by increasing the number of transactions? Don’t count on it. An Arby’s dollar menu will only slow the loss of customers.

Efficiencies have been achieved. At least the low hanging fruit like consolidating the corporate / executive functions of the merged companies has been completed. Operating efficiencies, like reducing food costs or other operating expenses, are a long and slow process. During a period of declining sales, like we are in now, any savings are offset by the higher percentage of sales that fixed costs account for. Q3’09 financial results improved at Wendy’s but primarily resulted from a drop in commodity costs (uncontrollable) and price increases. At some point, price increases will drive customers away and the current McD and BK $1 double cheeseburger war is likely to cause a trade down effect at all the burger chains.

Menu extensions, especially breakfast, have failed and nothing is in the pipeline. Breakfast is being abandoned everywhere but locations with strong morning traffic (where they should have had breakfast anyway). Approximately 300 Wendy’s or about 5% of the system that had introduced breakfast have now discontinued it. It’s not possible to be a player in breakfast without offering it at all locations (non-traditional locations like malls excluded). There is no convenience if customers have to figure out which Wendy’s offer breakfast and they certainly won’t go out of their way if they would have to drive past McD, BK or Dunkin Donuts.

Slowly expanding the number of units in operation. Cost of real estate, building and equipment do not allow for a sufficient ROI for any fast food concept (other than McD). If the ROI were favorable, WEN would be aggressively building new restaurants instead of buying back stock. In addition, financing sources for restaurant franchisees (like GE Capital) have exited the business.

Trian / Nelson Peltz holds an influential percentage of the outstanding stock. He always seems to make money but I’m not so sure about other investors. As an activist, he pushed Wendy’s (and Cracker Barrel for that matter) to financially engineer a higher stock price with non-recurring events like selling corporately owned restaurants and real estate but his actions when he controlled just Arby’s were the opposite – do as I say, not as I do.

Health trends do not materially impact fast food sales. Customers say they want healthier menu items but, when ordering, pay little attention of healthfulness. Convenience, impulse and/or cravings dominate what customers will order.

It may be waaay better than fast food but the stock should drop at least another 10%. Premium menu items will reward shareholders but not until unemployment is reduced significantly.

turnaround prospect

wendy's is going downhill fast. economy changes how people eat, and i have a feeling people dont waste their money at wendys when they are broke. Add to that the health food craze. This company has already taken a beating; and it won't recover until more important sectors of the economy recover.

Expecting good news.

breakfast and international expansion

WEN is on the way to $5 because:

1- Significant cost cutting. In this environment it counts as earnings.

2- Arby's sales may begin to stabilize and therefore stop being a drag on Wendys which is doing just fine

3- Tons of cash to jump on any opportinities that may arise as small players become to throw awa the towels.

4- A disaster 3rd quarter is already priced in the stock after UBS downgraded the stock to neutral from buy but kept $5 target on it.

5- The hedhe fund that own over 25% of WEN shares will keep WEN stock exciting especilaly after the company succeeded in rasing a lot of cash from their bond issuiance.

6- All you need is another hedge fund to show interest in WEN to see the stock po. Best exampleis RAD wgen was trading at a 1$ then jumped to $3 overnight when hedge funds began to load up on the stock.

7- International potential, expansion, dual branding, breakfast, cost cutting, synergies, effecincies, better executions, new product developments etc...all of this in under war.

Patient investors will be rewards nicely for holding this baby for a year or so. But for quick money get out when WEN announces 3rd quarter results. Take your monet and run to a near-buy wendys for a spicy chicken sandwiche combo.

With earnings coming out Nov.5, WEN will more than likely be profitable for the 2nd straight quarter and should send the stock into the $5-5.50 range.

Stock is down in price now, beat earnings last quarter posting a profit I believe it has been oversold from current pricing. If earnings are strong 11/2/2009 this stock will change direction and go the way it was suppose to be already heading. New bacon burger to tryout hoping they improve quality at all their locations to match the ones I go to :)

YES

I ate breadfast at Wendy's yesterday and was impressed by the amount of food I received and the quality. Their coffee can compete with MD and their food is better. Price wise it was about the same as garbage from Mc Donalds and Jack in the Sewer.

Fast food isn't going away. Wendy's and Arby's have relatively unique fare. Still cheap relative to peers.

Wendy's/Arby's is trading at a significant discount to its peers, but it is entirely unjustified. Looking forward, the company has several factors playing in its favor, and I believe its recent return to profitabilty is a good time to jump in and profit off the factors below:

1) Cost savings-

This is pretty much standard for any company turnaround, but the Wendy's/Arby's dual-branded restaurants have had early success in cutting costs

2) Breakfast Menu-

Wendy's currently does not participate much in breakfast sales. While this menu generally carries lower prices, breakfast accounts for 22% of industrywide traffic.That said, the Wendy's brand generates only about 2.2% of its sales from the first meal of the day. The majority of that figure, furthermore, came only from the testing of breakfast menus in about 10% of the company's restaurants. The tests have been successful to date, and Wendy's is planning to have rolled out that meal in all of its locations by 2011. Arby's has also worked hard to expand its offering in recent years by generating buzz in other products away from its traditional roast beef sandwiches.

3) International Expansion-

Of the more than 10,000 total locations between the two brands, only about 850 are located outside of the U.S. -- and the majority of those are in Canada.
Even so, earlier this year the company teamed with a Saudi- based company to build 135 dual-branded restaurants in the Middle East and North Africa. Wendy's also has plans to open another 35 locations in Singapore. In the meantime, there appears to be plenty of potential for the company to open other restaurants in Europe and and other areas of the world in which its larger competitors continue to enjoy success.

i made my prior call to early on this one. Now is the time to watch wendy's grow

WEN IS A PERFECT TAKEOVER TARGET FOR A COMPANY LIKE YUM...THEIR FUTURE IS BRIGHT EITHER WAY

"It's waaay better than other fast stocks... It's Wendy's"

This stock has taken a beating over the last two years. I don't know any information as to why that is. All I look at is the chart. It looks like it has found support and has broken the two year downtrend line with heavy volume at these low prices. Most likely this stock will trade around $10-$12 within the next year. When it hits that range that would be 100% profit and I would sell it and forget about it and move on to the next play.