Wendy's new CEO on Monday called the dour results of the past few years "self-inflicted wounds" and vowed to do better, laying out plans that included hiring top-tier workers and reclaiming market share from higher-end competitors like Five Guys and Smashburger.
Emil Brolick, the CEO since September, told investors on Monday that he was intent on winning back customers, jaded by a stale menu and inconsistent service, as well as investors, who have grown weary of "a little bit of overpromising and under-delivering."
And rather than blaming the struggling economy for the revenue declines and quarterly losses of the past few years, Brolick said that the company's problems were its own fault. Though Wendy's Co. had carved out a niche in the restaurant business as fast food for grownups, it had lost its way in recent years.
"These are not DNA issues," said Brolick, who also worked at Wendy's during more halcyon days of the late '80s and early '90s. "These are issues we caused, and any time you have self-inflicted wounds, you can correct self-inflicted wounds."
Brolick said he was intent on taking back lost market share from the likes of fast-casual competitors like Panera and Chipotle, by offering food that was just as good but at a lower price. The company has revamped its menu and is remodeling stores. It sold Arby's, which had been a drag on earnings, over the summer. And it's now intent on hiring "five star" employees in line with those at the fast-casual chains, Brolick said.
"Those folks at the bottom corner, there's a job waiting for them at our competitors," said Brolick, who has also hired a new general counsel at the Ohio headquarters and is adding a chief marketing officer and chief people officer.
Brolick, who was most recently a top executive at Yum Brands Inc., said he's bringing all Wendy's locations up to consistent standards for friendliness and cleanliness, rather than the current, unpredictable state of "one there is really, really good but this one over here isn't quite what it needs to be."
"We've made great progress in getting rid of those F restaurants and getting more A's and B's, but we're still in that territory," Brolick said.
Like many fast-food chains, Wendy's is taking some of its turnaround plans from McDonald's book. The much-larger burger chain has done well throughout the recession and its aftermath by trying to reinvent itself as a hip, healthy place. New offerings like fancy coffee drinks and smoothies, and remodeled restaurants with wireless access, have brought in customers who previously might have shunned it. At the same time, McDonald's has kept prices at fast-food levels so that its reliable base of cash-strapped customers doesn't flee for cheaper hamburgers at the gas stations.
McDonald's has run into some resistance from franchisees who sometimes have to foot the bill for the changes. Brolick said Wendy's franchisees were "very, very supportive "of the plans. He acknowledged that "we are going to spend a lot of their money," then added later: "The economics have to work. They do work."
Brolick's message to investors, who gathered at the Nasdaq building in New York, came a few hours after the company reported mixed results for the fourth quarter.
Wendy's income from continuing operations fell 30 percent to $4.3 million in the last three months of the year, down from $6.1 million in the fourth quarter of 2010. That year-ago number strips out the effect of Arby's, which Wendy's sold this summer to a private-equity firm.
Wendy's marriage with Arby's was short-lived. It began in the depths of the financial crisis in fall 2008, and ended when managers said they wanted to focus on the Wendy's brand alone. Wendy's said Monday it spent nearly $46 million over 2011 to break up with Arby's, including severance costs for some employees and retention bonuses for others.
Revenue rose 5.6 percent to $615 million, narrowly beating the $613 million predicted by analysts. The chain credited more customers visiting and spending more when they did, including on the revamped Dave's Hot 'N Juicy cheeseburger. Higher prices also helped.
Revenue at restaurants open at least a year climbed 4.4 percent in North America, the highest number in nearly 8 years, according to the company. That's a key measure of a company's health because it strips out the effect of newly opened or closed stores.
On a per-share basis, adjusted earnings were 4 cents, in line with the expectations of analysts polled by FactSet. That number excluded one-time charges like the costs for selling Arby's and writing down the value of some of its assets. With those charges, per-share earnings would have been 1 cent per share.
Last week, Barclays Capital analyst Jeffrey Bernstein spoke favorably of the changes at Wendy's, saying the company has greater potential for long-term earnings growth than competitors but is trading at a comparative discount. Sanford C. Bernstein analyst Sara Senatore said Monday that though revenue numbers beat her expectations, some of the earnings predictions that the company made for 2012 were below Wall Street's expectations.
Wendy's shares fell 20 cents, or 3.8 percent, to close at $5.01.
