Wendy’s
stock fell Thursday after the fast-food chain missed fourth-quarter earnings estimates and issued disappointing guidance. Still, the company’s new CEO, just nine days on the job, has big plans for 2024.
For the three months ended in December,
Wendy’s
reported earnings of 21 cents a share, below Wall Street estimates of 23 cents and a slight decline from last year’s 22 cents.
Revenue for the quarter came in at $540.7 million, missing analysts’ expectations of $547 million but up slightly from last year’s $535.5 million. Excluding the impact of foreign exchange, global systemwide sales grew by 3.2% from a year ago.
But part of the growth was because new restaurants opened during the year. Excluding those, Wendy’s same-restaurant sales in the fourth quarter only increased 1.3% from a year ago, missing the consensus call on FactSet for 2.5%.
Shares of Wendy’s dropped 2.5% in Thursday trading to $18.80. Coming into the session, the stock had dropped 16% over the last 12 months.
The fast-food chain is facing many challenges as elevated inflation puts pressure on consumers’ wallets. Low-income households, especially, have cut back their spending as meals have become more expensive.
In November, a large Wendy’s franchisee declared bankruptcy in Florida, citing shifting consumer habits, rising costs to do business, and significantly higher interest rates.
During the fourth quarter, although the average check size was higher, Wendy’s company-operated restaurants saw their margins compressed due to higher commodity costs, declining customer counts, and higher labor costs, the company said.
Earlier this month, Wendy’s new CEO Kirk Tanner took the helm; he had spent decades at
PepsiCo,
with experience leading both the beverage and food service business. During a Thursday call to discuss earnings with analysts, Tanner laid out his plans to accelerate the firm’s growth.
Tanner said breakfast can be an important growth engine without adding extra labor costs. The company plans to invest $55 million in advertising over the next two years, and expects to see a 50% increase in U.S. weekly breakfast sales to over $6,000 per restaurant.
“We are on a mission to ensure everyone has tried breakfast at Wendy’s, because we know from experience that once customers try our fresh cracked eggs and crispy bacon, they will be back again and again,” said Tanner during the call.
The CEO also plans to double down on March Madness advertising, roll out new flavors, and offer more deals to attract customers. He expects those investments to drive global same-restaurant sales growth of 3% to 4% in 2024.
Wendy’s said it expects its global systemwide sales to increase 5% to 6% in 2024, a similar pace to the 6.1% growth in 2023. Management expects full-year earnings between 98 cents and $1.02 per share. Analysts surveyed by FactSet were expecting $1.11 a share.
Wendy’s has successfully grown its digital sales from under $250 million in 2019 to almost $2 billion in 2023. To further drive digital growth, Tanner plans to invest $15 million to enhance the firm’s mobile app.
The company will also invest $30 million to put digital menu boards in all its U.S. restaurants by the end of 2025 and improve those around the globe over the next two years.
Write to Angela Palumbo at [email protected]
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