DUBLIN, OHIO — The first quarter ended April 3 did not go as planned for Wendy’s Inc. Margins were a disappointing 11.6%, and inflation was higher than expected.
As a result, the Dublin-based restaurant chain has made plans for further pricing actions.
“From a fiscal year point of view, the pricing is stepping up from kind of mid-single pricing expectation that we talked about last time to mid- to high single digits,” said Gunther Plosch, chief financial officer, in a May 11 earnings call. “That is then translating clearly in margin improvement starting in the second quarter. So, we'd expect to sequentially improve. Combining price increases with less inflationary pressure in the year to go, we are comfortable with the (fiscal-year) margin guidance of 14.5% to 15.5%.”
He said inflation was higher than expected in the first quarter with commodity inflation in the high-teen percentages and labor inflation in the mid-teens.
“The revised inflationary outlook was driven mainly by beef,” Plosch said. “Beef went up significantly.”
Other negative factors were bad weather early in the quarter affecting customer count and the impact of investments to support the chain’s entry into the United Kingdom.
Net income of $37.4 million, or 17¢ per share on the common stock, was down 10% from $41.4 million, or 19¢ per share, in the previous year’s first quarter. Total revenues increased 6% to $488.6 million from $460.2 million. Globally, systemwide sales growth was 4.2% thanks to a 19% increase in international sales. The increase was 2.4% in the United States.
Wendy’s stock on the Nasdaq closed at $16.07 per share on May 11, which was down 11% from a close of $18.10 on May 10.
The breakfast category was softer than anticipated in the quarter, said Todd A. Penegor, president and chief executive officer.
“Clearly, weather in January and February had an impact on the breakfast business,” he said. “Omicron early in the quarter had an impact on the breakfast business.”
Wendy’s still gained market share in breakfast since the category overall was down by high-single-digit percentages, Plosch said.
Penegor spoke about tailwinds in the breakfast category.
“You're starting to see a lot more folks returning to the office, feel comfortable getting into their routines, having that mobility really start to pick back up, really gives us an opportunity to showcase our great breakfast,” he said.