Is Wendy's a Wallflower?

Wendy's (NYSE: WEN) had a mixed menu of news for investors today. Although its same-store sales fell less than expected in December, it upped its legal reserves because of a negative verdict in a lawsuit and lowered its guidance. Would you like fries with that? Hmm, maybe not.

The restaurant chain said in its press release that same-store sales dropped 2.1%, while analysts were anticipating a 3% to 5% drop in same-store sales. Despite that better-than-expected news, though, Wendy's will increase its legal reserve by $0.03 per share, which will affect yearly earnings. The lawsuit in question regards a dispute over the purchase of some franchise restaurants in 1992.

Meanwhile, Wendy's earnings were already burdened with an impairment charge related to troubles at the Baja Fresh Mexican chain. (For more on that, be sure to check out Fool Rick Munarriz's recent take on the issue.)

Wendy's fourth-quarter earnings are now expected to be $0.43 per share to $0.46 per share, as compared with the previous range of $0.46 to $0.50 per share, if you don't include the impairment charge. With it, the company will report a loss of $1.06 per share to $1.26 per share for the quarter. For the year, Wendy's will report earnings of $2.10 per share to $2.13 per share, as compared with the old guidance for earnings of $2.13 to $2.17 per share.

Although McDonald's (NYSE: MCD) recent successes continuing unabated might make one think there's a renaissance going on in the fast food industry, Wendy's has experienced a recent slowdown, particularly in its namesake restaurants and the Baja Fresh chain.

On the other hand, Wendy's bright spot has been the success of its Tim Hortons concept. Today, it said that Tim Hortons same-store sales increased 9.8% here in the U.S. and up to 6.6% in Canada.

The fast food chain isn't taking it all lying down, though, with recent initiatives such as putting "choice" on the menu and shutting down underperforming Baja Fresh stores.

Wendy's still has a way to go to jump-start sales of its fast-food fare, especially in comparison to a powerhouse such as McDonald's or a breakout concept such as Sonic (Nasdaq: SONC). For the time being, Wendy's looks like the wallflower, a bit out of favor.

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Alyce Lomax does not own shares of any of the companies mentioned.