DUBLIN, Ohio – Same-store restaurant sales climbed 0.8 percent at North American system restaurants in the fourth quarter of 2016, but net income and revenues declined, The Wendy’s Company reported in its preliminary unaudited results. Wendy’s plans to file audited financial results on or before March 2.
“We have now recorded 16 consecutive quarters of positive same-restaurant sales and total new restaurant openings have accelerated in both North America and International with nearly 150 new restaurants opened globally in 2016,” President and CEO Todd Penegor said in a statement. “As a result of our brand transformation efforts and with the support from our franchise partners, the Wendy’s system has never been stronger.”
Wendy’s reported company-operated restaurant margin was 18.8 percent in the fourth quarter ended Jan. 1, compared to 19.2 percent in the year-ago period. The company attributed the 40 basis-point decline to higher other operating costs and increased labor rates, that partly were offset by lower commodity costs and a positive bump from the company’s Image Activation initiative.
However, net income for the quarter dropped 66 percent to $28.9 million, or $0.11 per diluted share, from $85.9 million, or $0.31 per diluted share reported in the fourth quarter of 2015. Adjusted earnings per share from continuing operations were $0.08 compared to $0.12 a year ago.
Revenues for the quarter dropped 33 percent to $309.9 million compared to $464.4 million in the year-ago quarter on fewer company owned restaurants. Wendy’s said company operated restaurants declined by 522 units at the end of the fourth quarter.
Wendy’s has completed its plan to reduce company owned restaurants to about 5 percent of the total system. In 2016, the company sold 310 restaurants to franchisees, in addition to 227 restaurants that were sold in the second half of 2015. In total, the third phase of system optimization generated pretax proceeds and fees of $435 million.
“Our system is stronger following the completion of the third phase of our system optimization initiative,” Penegor said. “All markets were awarded to strong operators who have demonstrated a commitment to restaurant reimaging and opening new restaurants which will be imperative to our future growth.
“Going forward, we will continue to strategically buy and sell restaurants in order to further strengthen our franchisee base, drive new restaurant development and accelerate Image Activation,” Penegor added. “By also facilitating franchisee-to-franchisee restaurant transfers (“buy and flips”) we ensure that we are putting restaurants in the hands of well capitalized franchisees that are committed to long-term growth. During 2016 we facilitated 144 buy and flips and expect to complete around 400 in 2017, which includes approximately 50 buy and flips that were originally scheduled to close in late 2016.”
Wendy’s also established a new share repurchase program and an increase in the quarterly dividend rate.
The company’s board of directors authorized a share repurchase program of up to $150 million of the company’s common stock through March 4, 2018.
The board also approved an increase of 0.5 cents per share. The new dividend rate of $0.07 per share will be effective on March 15, 2017. The increase is in addition to a 0.5 cents per share increase authorized in the fourth quarter of 2016.