Wendy's Profit, Revenue Top Expectations -- 2nd Update
February 09 2016 - 10:40AM
Dow Jones News
By Julie Jargon and Joshua Jamerson
Wendy's Co. reported fourth-quarter profit that beat
expectations by operating fewer of its own restaurants and by
offering meals for $4.
Wendy's said it expects same-store sales growth in 2016 of about
3% in North America, above the projection of 2.5% by analysts
surveyed by Consensus Metrix. The company also projected adjusted
per-share earnings between 35 cents and 37 cents, in-line with the
consensus view of 36 cents by analysts polled by Thomson
Reuters.
Like many other restaurant chains, including McDonald's Corp.
and Burger King, a unit of Restaurant Brands International Inc.,
Wendy's has sought a more stable cash flow and higher profits by
selling its company-owned restaurants to franchisees. Wendy's cited
its reduced ownership of restaurants as a reason for its higher
results in the quarter and said it plans to sell about 315 more
restaurants during 2016.
Wendy's has moved from having 78% of its restaurants owned by
franchisees to 85%, and plans to have 95% of its restaurants
franchised this year.
Wendy's could be entirely franchise-owned in the next two to
three years, RBC Capital Markets analyst David Palmer said in a
research note. He added that Wendy's will start opening net new
restaurants this year after a decade of contraction, with net unit
growth of at least 3% by 2020.
Wendy's said same-restaurant sales at North American restaurants
rose 4.8% in the quarter and 4.9% at its franchise-operated
locations, the best quarterly performance in four years. The
Consensus Metrix projection was for 3.1% growth at franchised
restaurants.
Wendy's shares fell 2.7% to $9.88 in recent trading.
The Dublin, Ohio, company's new "4 for $4" meal, introduced
nationwide in mid-October, helped boost sales in the quarter.
Chief Executive Emil Brolick, speaking at Wendy's annual
investor day meeting on Tuesday, said the bundled meal "is not just
about a good price point, it's about value as well. No one has ever
won a price war but you can win a value war."
Mr. Brolick in October announced plans to retire in May. He will
be succeeded by Chief Financial Officer Todd Penegor. Wendy's is
conducting an outside search for a new CFO.
Wendy's and other chains previously struggled to come up with a
value offering that would resonate with customers. McDonald's last
month launched a new value meal that allows customers to pick two
menu items for a total of $2. Other rivals have copied Wendy's $4
price point, including Burger King with its "5 for $4" meal and CKE
Restaurants Inc.'s Hardee's and Carl's Jr. chains with their "$4
Real Deal."
Wendy's posted earnings of $85.9 million, or 31 cents a share,
compared with a year-earlier profit of $23.3 million, or 6 cents a
share. Excluding certain items, earnings from continuing operations
were 12 cents a share, up from 8 cents a year earlier.
Analysts, on average, had expected 11 cents a share, according
to Thomson Reuters.
Revenue slipped 4.7% to $464.4 million, largely because of the
ownership of 363 fewer company-operated restaurants in the period.
Analysts had forecast $456 million in revenue.
Write to Julie Jargon at julie.jargon@wsj.com and Joshua
Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
February 09, 2016 10:25 ET (15:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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