Wendy’s Co. said Monday that a key measure of earnings dropped 30 percent in the fourth quarter, as charges for selling Arby’s offset the effects of a jump in revenue.
More visitors, who spent more on each visit, helped push revenue up 5.6 percent. So did higher prices. The company also credited the remake of its premium cheeseburger, Dave’s Hot `N Juicy, during the fall.
But Wendy’s has also been undertaking a much broader remodeling effort. In the past couple of years, it’s tried to work over its entire menu, introducing new salads, fries and desserts to attract customers who thought the menu had grown stale. It’s expanding into breakfast again after a failed attempt a few years ago. It’s growing internationally and just opened a restaurant in Japan, a change from its previous focus on domestic operations. It’s also remodeling restaurants.
Income from continuing operations fell to $4.3 million in the last three months of the year, down from $6.1 million a year ago. The company didn’t report what net income was on the basis that’s usually reported in regulatory filings. Wendy’s said it would report full results on March 1, but didn’t give the reason for that decision.
On a per-share basis, adjusted earnings were 4 cents, in line with the expectations of analysts polled by FactSet. That number excluded one-time charges like costs for selling Arby’s over the summer and writing down the value of some of its assets. However, Wendy’s did report that its per-share earnings would have been 1 cent if the one-time charges were included.
Revenue climbed to $615 million from $582.6 million a year earlier. The latest figure narrowly beat the $613 million predicted by analysts.
Revenue at restaurants open at least a year climbed 4.4 percent in North America, the highest number in nearly 8 years. That’s a key measure of a company’s health because it strips out the effect of newly opened or closed stores.
Its shares fell 11 cents, or 2.1 percent, to $5.10 in morning trading.
Emil Brolick, who became CEO in September, said the company is “making progress on re-establishing Wendy’s as the quality leader and innovator” in fast food. He’s spoken before about how he’s keenly aware of growing competition from fast-casual burger chains like Five Guys and Smashburger, and his goal is to attract customers who want a higher-end fast food.
Wendy’s managed to increase its profit margin to 15 percent from 14 percent, thanks to the revenue increases. However, like other restaurants, it’s still facing higher costs for some of its ingredients, including beef.
The chain is also still feeling the effects of its combination with Arby’s. The marriage was short-lived, beginning in the depths of the financial crisis in fall 2008 and ending this summer when Wendy’s sold Arby’s to a private-equity firm, saying it wanted to focus on the Wendy’s brand. Since then, it’s installed Brolick, a Yum Brands veteran, as CEO, and moved its headquarters back to Dublin, Ohio, from Arby’s home base in Atlanta. Wendy’s said Monday it spent nearly $46 million over 2011 to break up with Arby’s, including severance costs for some employees and retention bonuses for others.
The head of AT&T on Thursday suggested that the company might sell its directory business, which employs more than 500 people in St. Louis.
The company also reported a $6.68 billion loss for the December quarter, fueled largely by a $4 billion cancellation charge paid after the failure of its planned purchase of T-Mobile.
But the loss also included a non-cash charge of about $2.9 billion to reflect the falling value of its directory business, which includes the Yellow Pages phone book and its Internet incarnation.
AT&T expects earnings per share to grow by a mid-single-digit percentage in 2012, a bit lower than analysts had expected.
In a morning conference call with analysts, AT&T CEO Randall Stephenson labeled the directory business as underperforming.
“That’s one area that we’re going to obviously take a very hard look at, and while I don’t want to give any indication on M&A activity, it’s one of these areas that we’re going to have to decide, do we keep it, do we restructure it, as we move forward,” he said. M&A means mergers and acquisitions, the buying and selling of companies.
AT&T declined to give any further details on the directory business presence in St guaranteed high risk personal loans. Louis, or the company’s intentions. It also declined to say how many people the business employed locally.
However, that business employs 575 union members in St. Louis, plus management personnel, said Jim Kolve, executive vice president of Communications Workers of America Local 6300. The local workers handle sales, accounting, customer service and part of production, working on both the print director and the Internet.
AT&T’s directory business is the most profitable in the industry, said analyst Juli Niemann of Smith Moore & Co.
“This was a cash cow feeding tons into the company,” she said.
The phone company might use money from the sale to fund upgrades of its phone system and build its video business.
“They have big debt and an underfunded pension,” Niemann said. “They need the cash.”
The directory business is part of AT&T’s Advertising Solutions unit, which reported quarterly revenue of $781 million versus $926 million a year earlier.
Associated Press contributed to this report
Former U.S. Treasury Secretary Lawrence Summers said the U.S. economy is not yet at
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Ever since oil was discovered in the North Sea off the British coast in December 1969, the Scottish National Party claimed it for Scotland.
Now in power and closer than ever to a referendum on whether to break from the U.K. after more than 300 years, the SNP government in Edinburgh led by Scottish First Minister Alex Salmond is counting on tax revenue from the oil industry as a key pillar of the economy along with financial services.
Raw fish and cough medicine may not seem like they should occupy the same store, but a select few Walgreens now carry both.
In 2009 Walgreen Co., based in a Chicago suburb, announced it would elevate food offerings at some of its most prominent stores, in downtown Chicago, on Wall Street and elsewhere. Those stores – designed to trumpet that the century-plus-old pharmacy chain was entering new, more rarified terrain – now have sushi bars, $400 bottles of wine, cigar humidors and made-to-order smoothies.
But the company also promised it would fill more shelf space, including here in St. Louis, with cheaper, less esoteric offerings, especially in areas where low-income residents have little access to nutritious or fresh food. Walgreens plans to turn at least 500 of its 7,800 U.S. stores, most in low-income neighborhoods, into what the company is calling “food oases.”
“We found that in lower-income areas, in food deserts, that grocery stores have moved out,” said Bryan Pugh, the company’s vice president of merchandising. “It’s a very strategic initiative. Food brings the shopper in more often.”
So far the company has expanded offerings, including fresh produce, at a modest 35 stores in Chicago, Detroit, San Francisco, Oakland and Indianapolis. But it plans to expand to other cities over the next five years. The company aims to boost food offerings in some of its 110 St. Louis-area stores by 2013, Pugh said, noting that it has already rolled out new in-house food brands that are on store shelves already.
“We’re overhauling all our brands,” Pugh said.
Walgreens is not the only retailer who says it will bring fresh produce to under-served areas in St. Louis and beyond. Save-A-Lot stores have said they will open 500 stores in these neighborhoods in the five years, and Wal-Mart has made a similar commitment, saying it will open as many as 300 by 2016. But Walgreens already has a major presence in low-income urban areas, with stores already in place, making its efforts easier to execute, analysts note.
Walgreens’ move, analysts say, could help the company keep customers Walgreens is losing after the company’s split from pharmacy benefits manager Express Scripts. Walgreens stands to lose billions in sales as customers fill their prescriptions elsewhere.
“It’s really interesting timing, because Walgreens can re-establish themselves with people who can no longer fill their prescription there,” said supermarket analyst, Phil Lempert. “It’s: What can we sell them to keep them coming to our store, until they make the transition to Medicare?”
While Walgreens acknowledges that the move is strategic, it also says it has good intentions of providing fresh produce to nutrition-poor areas where fast food is usually the only source of calories. Nutritionists and critics, however, question how successful that effort could be.
“A lot of this is overblown,” said David Livingston, an analyst and supermarket industry researcher. “They already had some food items. They’re adding a few more. They’re adding a few more perishables. Are they really making a difference? I don’t think so.”
Walgreens says it will expand the space it devotes to food by 35 to 40 percent in some of its stores. But, Livingston notes, that translates to roughly 400 square feet. “That’s 20 by 20,” Livingston said. “That’s the size of my bathroom.”
Livingston and other analysts point out that grocery stores pulled out of these neighborhoods for a reason. “If there’s money to be made selling fresh produce, grocery stores would have figured it out,” he said. “I wonder what they’re thinking.”
Marjorie Sawicki, and assistant professor of nutrition and dietetics at Saint Louis University, said she believes Walgreens produce may make a small dent in nutrition-poor diets.
“Where we have food deserts, if there are fruits and vegetables, it might help, because there’s a Walgreens on every block,” Sawicki said. “If they displace items that are filled with sodium and fat, then it could have a benefit. It depends on how they emphasize the food.”
Bringing healthy food to under-served neighborhoods will require a more holistic approach, Sawicki says. “I think it’s a Band-Aid,” she said. “What we need to be looking at is creating community investment so people can access healthy food at a fair price and support the person who grew it. But that’s going to take time.”
Sawicki pointed to other efforts to bring produce to under-served areas, such as The North City Food Co-Op, as better models. Other new additions to the market landscape in St. Louis food deserts include YOURS Market, which opened in the Baden neighborhood in late 2010.
Still, Walgreens sees an opportunity.
The company did extensive research to determine which stores should sell more food. “Different stores have different trends,” Pugh said. “If I’m on a corner, near a Dominick’s, a Target and a Walmart , I’ll probably do better with beauty (products) there. I’ll look at my data by category and see if I’ve got traffic and I’m selling food. You can’t put fresh food in a store that’s not busy.”
The company’s plan, Pugh said, is not to expand the stores, but to devote more existing space to food. “We’re already in those areas,” he said. “We are the health care oasis there.”
Lempert says he believes that’s a smart strategy.
“I think it’s fascinating that for years drug chains had the lowest price for milk, that was their loss leader – what they did to get people in,” Lempert said. “Now they’ve leap-frogged milk, and said we can do this bigger and better.”
“We buy food 2.2 times a week, so if they can get more traffic in these stores, they sell more product,” Lempert added. “Supermarket sales are either flat or declining, and if you look at drug-store food sales, they’re through the roof.”
New Zealand police raided several homes and businesses linked to the founder of Megaupload.com, a giant Internet file-sharing site shut down by U.S. authorities, on Friday and seized guns, millions of dollars, and nearly $5 million in luxury cars, officials said.
Police arrested founder Kim Dotcom and three Megaupload employees on U.S. accusations that they facilitated millions of illegal downloads of films, music and other content costing copyright holders at least $500 million in lost revenue. Extradition proceedings against them could last a year or more.
With 150 million registered users, about 50 million hits daily and endorsements from music superstars, Megaupload.com was among the world’s biggest file-sharing sites. According to a U.S. indictment, the site, which was shut down Thursday, earned Dotcom $42 million in 2010 alone.
Although the company is based in Hong Kong and Dotcom lives in New Zealand, some of the alleged pirated content was hosted on leased servers in Virginia, and that was enough for U.S. prosecutors to act.
New Zealand police served 10 search warrants at several businesses and homes around the city of Auckland.
Police spokesman Grant Ogilvie said the seized cars include a Rolls Royce Phantom Drophead Coupe worth more than $400,000 as well as several Mercedes. Two short-barreled shotguns and a number of valuable artworks were also confiscated, he added.
He said police seized more than $8 million, money that was invested in various New Zealand financial institutions and which has now been placed in a trust pending the outcome of the cases.
New Zealand’s Fairfax Media reported that the four defendants stood together in an Auckland courtroom in the first step of the extradition proceedings.
Dotcom’s lawyer raised objections to a media request to take photographs and video, but then Dotcom spoke out from the dock, saying he didn’t mind photos or video “because we have nothing to hide.” The judge granted the media access, and ruled that the four would remain in custody until a second hearing Monday.
Dotcom, Megaupload’s former CEO and current chief innovation officer, is a resident of Hong Kong and New Zealand and a dual citizen of Finland and Germany who had his name legally changed. The 37-year-old was previously known as Kim Schmitz and Kim Tim Jim Vestor.
Two other German citizens and one Dutch citizen also were arrested and three other defendants _ another German, a Slovakian and an Estonian _ remain at large.
Megaupload has retained Washington power attorney Bob Bennett to defend it, according to a person inside the company. Bennett is best known for representing former President Bill Clinton during the Monica Lewinsky scandal. The person within Megaupload spoke on condition of anonymity because he was not authorized to discuss the company’s plans.
The Electronic Frontier Foundation, which defends free speech and digital rights online, said in a statement that the arrests set “a terrifying precedent. If the United States can seize a Dutch citizen in New Zealand over a copyright claim, what is next?”
The indictment was unsealed one day after websites including Wikipedia and Craigslist shut down in protest of two congressional proposals intended to make it easier for authorities to go after sites with pirated material, especially those with overseas headquarters and servers.
Before Megaupload was taken down, the company posted a statement saying allegations that it facilitated massive breaches of copyright laws were “grotesquely overblown.”
“The fact is that the vast majority of Mega’s Internet traffic is legitimate, and we are here to stay. If the content industry would like to take advantage of our popularity, we are happy to enter into a dialogue. We have some good ideas. Please get in touch,” the statement said.
Several sister sites were also shut down, including one dedicated to sharing pornography files.
News of the shutdown seemed to bring retaliation from hackers who claimed credit for attacking the Justice Department’s website. Federal officials confirmed it was down for hours Thursday evening and that the disruption was being “treated as a malicious act payday loans online.”
A loose affiliation of hackers known as “Anonymous” claimed credit for the attack. Also hacked was the site for the Motion Picture Association of America, which has campaigned for a crackdown on piracy.
According to the indictment, Megaupload was estimated at one point to be the 13th most frequently visited website on the Internet. Current estimates by companies that monitor Web traffic place it in the top 100.
Megaupload is considered a “cyberlocker,” in which users can upload and transfer files that are too large to send by email. Such sites can have perfectly legitimate uses. But the Motion Picture Association of America estimated that the vast majority of content being shared on Megaupload was in violation of copyright laws.
The website allowed users to download some content for free, but made money by charging subscriptions to people who wanted access to faster download speeds or extra content. The website also sold advertising.
Megaupload was unique not only because of its massive size and the volume of downloaded content, but also because it had high-profile support from celebrities, musicians and other content producers who are most often the victims of copyright infringement and piracy. Before the website was taken down, it contained endorsements from Kim Kardashian, Alicia Keys and Kanye West, among others.
The company listed Swizz Beatz, a musician who married Keys in 2010, as its CEO. He was not named in the indictment and declined to comment through a representative.
The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.
For instance, users received cash bonuses if they uploaded content popular enough to generate massive numbers of downloads, according to the indictment. Such content was almost always copyright protected, the indictment said.
The Justice Department said it was illegal for anyone to download pirated content, but their investigation focused on the leaders of the company, not end users who may have downloaded a few movies for personal viewing.
A lawyer who represented the company in a lawsuit last year declined to comment Thursday. Efforts to reach an attorney representing Dotcom were unsuccessful.
Although Megaupload is based in Hong Kong, the size of its operation in the southern Chinese city was unclear. The administrative contact listed in its domain registration, Bonnie Lam, did not respond immediately for a request for comment sent to a fax number and email address listed.
The indictment was returned in the Eastern District of Virginia, which claimed jurisdiction in part because some of the alleged pirated materials were hosted on leased servers in Ashburn, Virginia. Prosecutors there have pursued multiple piracy investigations.
The Justice Department also was investigating the “significant increase in activity” that disrupted its website. It said in a statement that it was working to “investigate the origins of this activity, which is being treated as a malicious act until we can fully identify the root cause.”
The site appeared to be working again late Thursday. A spokesman for the Motion Picture Association of America said in an emailed statement that the group’s site also had been hacked, but it too appeared to be working later in the evening.
“The motion picture and television industry has always been a strong supporter of free speech,” the spokesman said. “We strongly condemn any attempts to silence any groups or individuals.”
____
Matthew Barakat reported from McLean, Virginia. AP Business Writer Daniel Wagner in Washington contributed to this report.
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