Wendy's (NYSE:WEN) is looking more and more like a bachelorette these days.
After spinning off its Tim Hortons (NYSE:THI) chain last month, and with a deal in place to sell Baja Fresh in the current quarter, we're starting to see what Wendy's looks like on its own (along with its much smaller Cafe Express concept).
This afternoon, Wendy's posted third-quarter results that -- like asking for a Wendy's Single without the lettuce, pickles, tomato, onion, condiments, or beef patty -- is bare, and all about the bread.
With the luxury of reporting results from continuing operations (no more Baja Fresh sandbagging), the company posted flat earnings of $0.16 a share, off a penny from last year's $0.17-a-share showing for its continuing operations. Sales inched 2.5% higher as a result of healthy 4.1% comps growth in its Stateside units, partly offset by the fact that there are fewer Wendy's burger joints open now than there were a year ago.
It's a mixed showing, for sure, but let's not let Wendy's get off the hook by flashing those pretty comps. The company's domestic comps fell by 5% in 2005, so unit-level sales are still ringing up lower than they did during the September quarter of 2004.
But if stagnant unit growth and deceptive comps find you souring on Wendy's, you might want to think twice before stepping into that grease trap. There are plenty of reasons to get excited about Wendy's. We just haven't seen them all yet.
For starters, Wendy's comps are likely to climb even higher once it introduces a breakfast menu next year. We'll have to see how the margins pan out early on, but it was really just a matter of time before Wendy's gave the morning crowd another crack after watching rivals McDonald's (NYSE:MCD) and Burger King (NYSE:BKC) do so well.
The company is also rolling out giftcards. Once exclusively the turf of specialty retail and casual dining, the quick-service industry is following the lead set by Starbucks (NASDAQ:SBUX) -- and more recently McDonald's, with its Arch card -- in issuing cards that can be loaded and preloaded either as gifts, of for people who just don't like to handle greenbacks before handling their grub.
The next few quarters will be interesting ones for the company. The company is in the process of buying back shares and finding a permanent CEO. The market's reception of the new breakfast menu and the expanded Double Melt line will also help define the company's prospects in the future. Fast-food chains are usually steady vehicles with predictably steady near-term futures, but Wendy's isn't wearing those shoes at all at the moment.
There may be a little volatility here, and that's not necessarily a bad thing. Because there may also be a little more excitement here, and that's definitely not a bad thing.
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Longtime Fool contributor Rick Munarriz enjoys those new Frescata sandwiches at Wendy's. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
