Shares of Wendy's International (NYSE: WEN) are down 5% today after the burger chain lowered its fiscal 2004 earnings outlook between $2.25 and $2.30 per share from its previous forecast of $2.32 to $2.37 per share. The company cited a number of factors for the weaker guidance, including business lost to the recent trio of hurricanes, an increase in legal reserves, higher beef costs, and "short-term challenges" at Baja Fresh Mexican Grill.
Wendy's now forecasts third-quarter earnings of $0.59 to $0.60 per share, short of the $0.64 per-share analyst estimate.
The company, which operates 1,030 Wendy's restaurants in the storm-battled states of Florida, Georgia, Alabama, Louisiana, and Mississippi, has lost over 2,000 store days to Hurricanes Charley, Frances, and Ivan. Those states represent about 18% of Wendy's U.S. stores. In addition, the poor weather that followed the hurricanes hurt customer traffic, particularly in the Southeast and Northeast regions of the U.S.
The result was a same-store sales decline of 1%.
There's more. Structural damage from the hurricanes also amounted to three separate insurance deductibles costing a total of $750,000. And as if that wasn't enough, lease termination costs related to the closing of five Baja Fresh restaurants cost an additional $500,000. The company also increased its legal reserves.
Wendy's, the third-largest burger chain in the U.S. behind McDonald's (NYSE: MCD) and Burger King, also said that fourth-quarter earnings would be hurt, as the company expects beef prices to be up 7.8% over last year's fourth quarter to $1.39 per pound. The company also "expects sales and operational challenges to continue at Baja Fresh."
As we've discussed in recent days, hurricanes have been good to some companies, including Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) (see "The Windfall of Hurricanes"), and also Wal-Mart (NYSE: WMT) to some extent. But the storms have been damaging to most companies with a strong presence in the affected regions, including JetBlue Airways (Nasdaq: JBLU) (see "Charley, Frances, and JetBlue") and Office Depot (NYSE: ODP) (see "Office Depot Misses School for Real").
Wendy's clearly falls into the latter category.
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Fool contributor Jeff Hwang owns none of the companies mentioned above.
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