NEW YORK (CNN/Money) -
Wendy's said Thursday its quarterly profit slipped largely due to weak sales following a woman's claim that she found a severed finger in a bowl of chili at one of its restaurants in California.
The company said the negative publicity surrounding the chili incident hurt same-store sales by approximately 2 percent to 2.5 percent with the Western region being hit the hardest.
Anna Ayala of Las Vegas caused a media sensation in March with her claim of the finger in her food at a San Jose, Calif., Wendy's. Police have since charged Ayala with attempted grand theft. The company stated Thursday that sales in the first quarter have fallen $1.5 million.
On a per-share basis, earnings remained unchanged from a year ago at 45 cents a share while revenue rose 7.1 percent from $835 million to $894 million, largely due to strong business at its Tim Hortons segment.
Shares of Wendy's International (up $1.43 to $42.70, Research) were up more than 2 percent in afternoon trading.
By comparison, that segment reported sales growth of 9.1 percent last year.
The Dublin, Ohio-based fast food chain operator also said sales at its Baja Fresh Mexican Grill operation, which fell 6.1 percent during the quarter, were lower than expected.
Looking forward, Wendy's International, the nation's No. 3 hamburger chain by sales, said it expects beef costs to rise to $1.52 per pound, versus $1.23 last year, but that price pressures should ease in the second half of the year.
For the full fiscal year, the company revised upwards its earnings guidance to a range of $2.29 to $2.35 from a range of $2.17 to $2.23 due to management's decision to defer expensing for stock options to 2006. Originally, Wendy's International had planned to adopt the expenses in 2005.
Analysts polled by Thomson First Call are forecasting per-share earnings in the range of $2.13 to $2.25.
Will a Wendy's shareholder push to spin off a division of the company? Click here.