7. Wendy’s Arby’s
Wendy’s/Arby’s Group, Inc. (NYSE: WEN) is in need of direction. Being under the great Nelson Peltz has so far yielded very little reward for holders. Fast food was supposed to be a winner of The Great Recession and in the recovery where so much of the country still has to mind its pennies. The problem seems to be that consumers are always saying “I’m Lovin’ It!” over at McDonald’s Corporation (NYSE: MCD).
The company’s spin-off of Tim Horton’s Inc. (NYSE: THI) has performed well, but not enough to offset the decline in Wendy’s shares. It seems that the real hope here rather than a turnaround is yet another rumor that he’s going to take this one private or a hope that a restructuring will do the trick. As it stands today with shares close to $4.50, Wendy’s/Arby’s is stuck in the drive-thru.
Winn-Dixie Stores Inc. (NASDAQ: WINN) is not alone in its quest for a turnaround in grocery land. The company emerged from bankruptcy in 2006 with fewer stores than it had in the 1960’s. Its effort to modernize stores has yet to bring any substantial revenue increase and its current Thomson Reuters expectation if for fiscal June 2011 and June 2012 to have financial losses and lower revenues coming in under $7 billion versus an average of about $7.3 billion in the three prior years.
The problem is that with shares at $6.41, the stock is down more than 75% from its post-bankruptcy peak and the slide down in shares seems to be almost constant. You could almost make the same argument against SuperValu (NYSE: SVU), except that it did not have to go through a bankruptcy restructuring. It is also impossible to ignore what has happened with Great Atlantic or A&P. Wal-Mart Stores Inc. (NYSE: WMT) and similar competition is a culprit, but at the end of the day it seems that there are two groups when it comes to grocery chains: well-run grocery chains and then all the losers.
YRC-Worldwide Inc. (NASDAQ: YRCW) may look and feel better now that it is not trading down in the pennies. Unfortunately, that is just because of a reverse stock split enacted in 2010. YRC-Worldwide did not recover much as the economy began to recover for transportation companies. The shareholders probably wish they could go back and undo the merger between Yellow Corp. and Roadway Corp. The economic slowdown killed the firm. Then YRC-Worldwide had to get bondholders to exchange a large piece of debt for most of the equity in the company and it had to get union concessions in exchange for a stake in the company. The Teamsters have now approved extensions for YRC to restructure its finances.
Revenues fell from $9.6 billion in 2007 to $5.28 billion in 2009, and the Thomson Reuters consensus shows expected revenues of $4.37 billion for 2010 and only back up to $4.46 billion in 2011. Any hint of a positive earnings or cash flow positive goal would create a monster run with a likely short squeeze.
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JON C. OGG