WENDY'S REPORTS STRONG THIRD QUARTER

Acquires 25% Stake in Pasta Pomodoro Chain

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CHICAGO (AdAge.com) -- Wendy's International defied the current burger burnout plaguing its competitors, posting strong quarter-over-quarter sales and snapping up yet another sough-after fast casual chain.

In announcing its third-quarter results, Wendy's said it is investing $12 million for a 25% stake in the Pasta Pomordoro fast-casual Italian chain. The 24-unit chain is concentrated in Bay Area of California and seats an average of 75 people with an average tab of $9 at lunch and $14 at dinner.

Strategic framework
"Pasta Promodoro fits very

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well into our strategic framework for mergers, acquisitions and investments," Chairman-CEO Jack Schuessler said in a statement. He said the chain is capable of growing to between 75 and 100 units by the end of 2005.

In May, Wendy's acquired the 191-unit Baja Fresh fast-casual Mexican chain for $275 million. In February, not long after the death of Wendy's founder, Dave Thomas, the company bought Southwest-based upscale bistro chain Cafe Express for $10 million.

Net income surges
For the third quarter ended Sept. 29, Dublin, Ohio-based Wendy's International, owner of hamburger restaurants Wendy's and donut chain Tim Horton's, reported net income surged 16.3% to $60.9 million, or 52 cents per diluted share. Sales at company-owned stores open at least a year grew 5% at Wendy's, 5.8% at Tim Horton's Canada and 8.8% at Tim Horton's U.S.

While aggressive discounting programs launched during the quarter by larger rivals McDonald's Corp. and Burger King Corp. haven't boosted sales significantly, Wendy's, the No. 3 burger chain, credited its 13-year-old 99-cent Super Value Menu for driving July and September sales.

Wall Street not impressed
Despite Wendy's strong performance, it wasn't enough to keep Wall Street happy. Shares tumbled today to $32.65 after Wendy's met analysts' earnings expectations but didn't beat them.

"It appears that at least some investors were disappointed that the company didn't report a little better earnings considering continuing strong sales trends," said Alan Hickok, restaurant analyst with U.S. Bancorp Piper Jaffray.

Wendy's ended trading today at $32.94, nearly 4% off Wednesday's close of $34.30.

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