Wendy's International Inc. on Thursday reported a 2.8% drop in first-quarter earnings, which it blamed in part on a woman's discredited claim that she bit into a severed fingertip while eating chili at a Wendy's in San Jose.
For the quarter ended April 3, the third-largest U.S. hamburger chain said net income fell to $51.3 million, or 45 cents a share, down from $52.8 million, or 45 cents, from the same period last year. The company had nearly 2% fewer shares outstanding in the latest quarter compared with the first quarter of 2004.
In addition to the finger incident, the Dublin, Ohio-based company said its financial results were hurt by rising beef prices, severe weather and falling sales at its Baja Fresh Mexican Grill division, which dropped 6.1%. Two weeks ago, Wendy's named a new chief executive to head its Thousand Oaks-based Baja Fresh unit.
Still, the company's showing beat Wall Street expectations. Analysts surveyed by Thomson First Call expected it to earn 40 cents a share.
Revenue was up 7.1% to $894 million, helped by sales growth at the company's Tim Hortons chain, which serves coffee, doughnuts and sandwiches.
On March 22, Anna Ayala reported that she had found a severed fingertip in her Wendy's chili. The claim dragged down sales at Wendy's restaurants in the United States by 2% to 2.5%, the company said, particularly in the San Francisco Bay Area where the tale was widely reported. Ayala, 39, was arrested last week at her Las Vegas home after authorities said her claim was a hoax.
"We feel that Wendy's has been vindicated and we're eager to move on," Chief Executive Jack Schuessler told analysts in a conference call Thursday. Schuessler added that Wendy's had launched a marketing plan to revive sales at restaurants in the Bay Area.
Wendy's shares rose $1.43, or 3.5%, to $42.70 on the New York Stock Exchange.
Other earnings news:
* Irvine-based home builder Standard Pacific Corp. posted a 94% increase in first-quarter earnings to $82.1 million, or $2.36 a share, from $42.4 million, or $1.21, a year ago. The company forecast second-quarter earnings of $2.65 a share and targeted 2,650 home deliveries, excluding 100 joint venture homes.
* Managed-care company PacifiCare Health Systems Inc. reported a 28% increase in profit for the first quarter to $85.7 million, or 89 cents a share, from $67 million, or 71 cents, a year earlier. Revenue at the Cypress company rose to $3.44 billion from $3 billion.
* IHOP Corp. of Glendale said first-quarter earnings fell 7.7% from last year, as modest same-store sales growth failed to offset expected increases in general and administrative spending. Net income edged downward to $10.1 million, or 50 cents a share, from $10.9 million, or 50 cents, last year. Revenue fell to $85.8 million from $91.9 million last year.
* California Pizza Kitchen Inc. of Los Angeles said sales of new menu items and strong performance at new restaurants helped increase first-quarter earnings to $4.3 million, or 22 cents a share, from $4.2 million, or 22 cents, a year earlier. Revenue climbed 11.9% to $110.3 million.
* Guitar Center Inc. of Westlake Village said strong sales at the musical instrument retailer's namesake stores and online unit hiked first-quarter net income 35% to $15.9 million, or 56 cents a share, from $11.8 million, or 44 cents, a year earlier. Sales rose 13.3% to $396.4 million.
* Ingram Micro Inc., the Santa Ana distributor of computers, software and electronics, said first-quarter profit rose 13% because sales in Europe and Asia increased. Net income rose to $42.5 million, or 26 cents a share, from $37.6 million, or 24 cents, a year earlier. Sales rose 12% to $7.05 billion.
* K-Swiss Inc. of Westlake Village said first-quarter profit rose 19% to $25.9 million, or 72 cents a share, from $21.8 million, or 57 cents, a year earlier. Sales increased 0.7% to $153 million.
* Molina Healthcare Inc. of Long Beach said first-quarter net income rose to $14.8 million, or 53 cents a share, from $11.1 million, or 43 cents, a year earlier.