Wendy’s Says It Will Post Loss

Wendy’s International Inc. on Wednesday reported a preliminary loss of $135.7 million for the fourth quarter, attributed mainly to writing down the value of its struggling Baja Fresh Mexican Grill restaurant subsidiary. The results fell short of Wall Street projections, and Wendy’s shares dropped 5%.

The suburban Columbus, Ohio-based fast-food chain said the earnings would be revised to reflect a possible further loss after it changed how rental leases are recorded. The company expects a pretax expense of $6 million to $9.5 million, or 3 to 5 cents a share, after the accounting change.

In its preliminary results, Wendy’s reported a loss of $1.20 a share for the quarter ended Jan. 2, contrasted with earnings of $64.7 million, or 56 cents, a year earlier. Sales rose 13% to $972.7 million from $862.4 million.

Estimating the expense of the accounting change delayed the earnings about two weeks, and the company will finalize the figures by the time it reports them to the Securities Exchange Commission next month, spokesman Bob Bertini said.

The company also blamed high beef prices and tomato shortages caused by hurricanes in Florida for its loss.

Wendy’s said in November that it expected to report a loss for the fourth quarter as it reduced the value of the Baja Fresh Mexican Grill chain and said it would close 20 of the restaurants.

The company also took a charge for the quarter while it appeals a $5.1-million verdict in a lawsuit that accused it of interfering in the sale of some Florida restaurants.

Excluding charges, the company made 44 cents a share for the quarter. Analysts surveyed by Thomson First Call expected earnings of 45 cents a share.

For the year, Wendy’s profit was $57.8 million, or 50 cents a share, down more than 75% from 2003, when earnings were $236 million, or $2.05. Revenue increased 15% to $3.6 billion.

Wendy’s stock fell $2.08 to $38.75 on the New York Stock Exchange.