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Wendy's to take 4Q charge
November 28, 2000: 8:15 a.m. ET

Fast-food chain sees 8-11 cent a share impact from Argentina restaurant closings
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NEW YORK (CNNfn) - Wendy's International Inc., the fast-food chain operator, said Tuesday it would close 18 underperforming restaurants in Argentina, causing the company to take $17 million to $22 million in non-cash charges in the fourth quarter.

In spite of the charge, the company raised its goal for earnings per share growth in 2000 to 17-19 percent from 14-17 percent.

Wendy's also said it would provide severance packages to 600 employees affected by the closings.

Analysts expected Dublin, Ohio-based Wendy's to earn 38 cents a share in its fiscal fourth-quarter, compared with earnings of 33 cents a share in the year-earlier quarter, according to earnings tracker First Call. But the company said the closings would shave between 8 cents and 11 cents a share from the quarterly results.

"The economic and competitive conditions we faced in Argentina were just too difficult to overcome, despite the efforts of our management team and a dedicated crew at the stores," Chief Executive Jack Schuessler said in a statement. "We adjusted our pricing strategy and increased customer service programs. However, it is clear there are not sufficient prospects for operational or financial improvement on the horizon."

graphicSchuessler also said all 367 Wendy's restaurants outside North America are now franchised, except for four stores in Guam, and that the company will be "very disciplined, focusing on our areas of strength with experienced franchisees that have strong operational and financial experience" with regard to international operations.

Tony Howard, an analyst with J.J.B. Hilliard, W.L. Lyons, said he remained confident in Wendy's North American operations, where its Wendy's restaurants in the United States and Tim Horton's restaurants in Canada continue to perform well.

He applauded the decision to close 18 underperforming stores in Buenos Aires, since the company has not done well there due to competition from McDonald's (MCD: Research, Estimates) and a lack of significant presence.

"Wendy's has not done all that well in all their international operations," Howard said. "The combination of the competition, but also lack of size and presence hurt them. Wendy's domestically is doing well. Tim Horton's in Canada is doing well, but everything else has been somewhat weak"

Howard, who recently downgraded the stock to a long-term buy, said the company has a lot of momentum going forward, but he remains cautious about possible decreased consumer spending and continued high labor costs impacting sales and profits in 2001.

Wendy's (WEN: Research, Estimates) shares slipped 88 cents to $25.31 in trading Monday. graphic


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