Sector Snap: Burger Chain Shares Fall

Shares of the nation's burger chains fell Friday as disappointing sales results at Wendy's International Inc. made some on Wall Street question whether fast food stocks could be impacted by a consumer spending slowdown.

Before the market opened, Wendy's _ the nation's No. 3 burger chain _ said its fourth-quarter same-store sales at U.S. company-owned restaurants fell 0.8 percent while December same-store sales dipped 1 percent.

Same-store sales, or sales at locations open at least a year, is a key indicator of restaurant performance since it measures growth at existing locations rather than newly-opened ones.

The sales results disappointed Wall Street analysts, who largely expected a slight rise in same-store sales.

Restaurants have all struggled lately as consumers have pulled back on spending due to the weak housing market and higher gas and food prices. Higher costs for food and labor have also cut into profits.

The combination of lower spending and higher costs has hit casual dining operators particularly hard, since their prices are higher and they are less exposed to growing international markets. Fast food operators, though, have been performing well.

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Goldman Sachs analyst Steven T. Kron said in a note to investors that it's difficult to predict whether Wendy's results signal the approach of lower sales throughout the fast food sector since Wendy's was later than competitors at offering value and breakfast options.

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"While the deteriorating macro environment and consumer spending headwinds could very well show up in fourth quarter results for other quick service restaurants, we believe that McDonald's and Burger King remain better-positioned than Wendy's, as has been the case throughout 2007, to attract value and convenience-seeking consumers," he said.

Wendy's shares fell $1.61, or 6.5 percent, to $23.25 in morning trading and set a 52-week low of $23.21. McDonald's Corp. fell $1.05 to $56.88 while Burger King Corp. dropped $1.10, or 4 percent, to $26.25.

Shares of CKE Restaurants Inc., which operates the Hardee's and Carl's Jr. chains, fell 56 cents, or 4.5 percent to $12.01 and also set a year low of $11.84.