Wendy's scores with 4 for $4

by Monica Watrous
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 Wendy's saw a rise in customer visits during the recent quarter, driven in part by the chain’s 4 for $4 value offering.

DUBLIN, Ohio – More customers visited Wendy’s restaurants in the recent quarter, driven in part by the fast-food chain’s 4 for $4 value offering, said Todd Penegor, president and CFO of The Wendy’s Co. North America system same-restaurant sales during the period increased 3.6 percent over the comparable quarter.

 

Todd Penegor, president and CFO of Wendy's 

“We believe 4 for $4 is meeting a consumer need for compelling value combined with a high-quality unique offering,” Penegor said during a May 11 earnings call with financial analysts. “The customer count growth we are experiencing is encouraging and we anticipate continuing to use value bundles in concert with core and LTO messages to bring in more customers to experience our restaurants.”

Net income for the first quarter ended April 3 was $25,363,000, equal to 9 cents per share on the common stock, which compared with $27,507,000, or 8 cents per share, in the same period of the previous year. Revenues were $378,787,000, down 16 percent from $451,769,000 the year before.  The decline was due to a reduction in company ownership of 375 restaurants compared to the year-ago quarter.

“As a result of our first-quarter outperformance relative to our annual operating plan, we are increasing our 2016 outlook for both adjusted earnings per share and adjusted EBITDA,” Penegor said. “Our expectation for adjusted EPS is now 38 cents to 40 cents versus our prior guidance of 35 cents to 37 cents, and we now expect adjusted EBITDA to be in the range of down 1 percent to up 1 percent compared to 2015 versus our prior guidance of down 2 percent to flat.”

The company said its refranchising initiative remains on track, with plans to sell approximately 315 restaurants in 2016, including 55 restaurants that were sold in the first quarter, and following the sale of 826 restaurants since 2013. Wendy’s plans to reduce restaurant ownership to approximately 5 percent of the total system.

 
Wendy’s plans to update 430 total North America system restaurants to its new image in 2016.

 Additionally, Wendy’s continues to make progress in its reimaging and new restaurant development efforts, with plans to update 430 total North America system restaurants and build 110 new North America restaurants in 2016, which is in addition to the 519 total North America system reimages and new restaurants built in 2015.

“More than 24 percent of the Wendy's system is currently on the new image and we expect that number will rise to approximately 30 percent by the end of this year,” Penegor said.

While the company remains confident in achieving its full-year target of 3 percent growth in same-restaurant sales, executives warned of softer sales trends in the current quarter. Penegor attributed the anticipated shortfall to poor weather and continued consumer caution.

“There has been little or no wage growth,” he said. “You got the general election uncertainty. So it has been hard to really pinpoint what's driving that… So, our hope is that is more of an aberration, but if the business is only growing at 0 percent to 1 percent into the future, we have initiatives that we have in place both on high and low that will help us continue to grow share and deliver our commitments.”

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