Wendy’s Co. cut its full-year sales guidance after posting a bigger-than-expected quarterly decline, highlighting the economic pressures weighing on the chain’s US business.
The chain now expects global system-wide sales to fall between 3% and 5% this year, while it previously foresaw they could be flat to down 2%, the company said Friday. System-wide sales includes results from all locations, including those that opened recently.
Meanwhile, the second-quarter sales decline at established locations was deeper than analysts polled by Bloomberg predicted. US results by that metric fell more than Wall Street foresaw, while rising less than anticipated for the international business. The chain beat on margin expectations and revenue was slightly ahead of estimates.
The results point to the chain’s ongoing challenges in reeling in diners facing deteriorating US economic conditions. Restaurant chains have reported mixed results in the latest quarter, with some that offer cheap meals and buzzy product collaborations outperforming, while others have struggled to show diners their menus were worth the money.
Wendy’s has “work to do to improve the overall performance of the business in the US,” Ken Cook, interim chief executive officer, said in the earnings statement. The company will look to improve the customer experience and the effectiveness of its marketing programs, he said. July comparable sales in the market fell 5% to 6%, Cook said Friday on a call with analysts.
The chain’s priorities for the rest of the year include boosting its chicken lineup, including new tenders, as it seeks to tap into a fast-growing category. It’s also launching new beverages — another booming segment — such as a fresh cold brews, Cook said.
Wendy’s shares rose 3% at 9:33 a.m. in New York on Friday. Year to date through Thursday’s close, they’d fallen 39%.
In the second quarter, Wendy’s efforts to entice customers included deals for app users, new versions of its Frosty treats and a meal tie-in with Takis, a corn chip snack, that launched in late June.
Wendy’s will rein in the number of launches and promotions for the rest of the year after realizing the onslaught was difficult for restaurants to keep up with. Moreover, deals such as $1 drinks didn’t lift sales as much as expected, Cook said on the analyst call. The Takis meal underperformed after the first week, he added.
“This summer we learned that when we have too many priorities, we have none,” he said.
Wendy’s has expanded operating hours as it makes it a push for breakfast and late-night business. It’s also looking to improve how restaurants are run, in part by tracking performance more closely, and to work more closely with franchisees.
In July, the chain appointed Cook as interim CEO after Kirk Tanner left for the top job at Hershey Co.
Written by: Daniela Sirtori @Bloomberg
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