The Wendy's Co (WEN) Q1 2025 Earnings Call Highlights: Navigating Challenges with Strategic ...

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Sat, May 3, 2025, 1:02 AM 4 min read

Global Same-Restaurant Sales: Declined 2.1%.
US Same-Restaurant Sales: Decreased 2.8%.
International Same-Restaurant Sales: Increased 2.3%.
Global Systemwide Sales: Declined 1.1% on a constant currency basis.
International Systemwide Sales Growth: 8.9%.
New Restaurant Openings: 74 new restaurants globally, with over 60% international.
Adjusted EBITDA: $124.5 million, a decrease of $3.3 million.
Adjusted Earnings Per Share (EPS): $0.20, a decrease of $0.03 from the prior year.
Free Cash Flow: $68 million under the new definition.
Capital Expenditures: $17.7 million invested in the first quarter.
Share Repurchases: 8.2 million shares for approximately $124 million in Q1.
Dividend Payment: $0.14 per share for the second quarter.
Full Year Global Systemwide Sales Outlook: Expected to range from down 2% to flat.
Full Year Adjusted EBITDA Outlook: Between $530 million and $545 million.
Full Year Adjusted EPS Outlook: $0.92 to $0.98.

Warning! GuruFocus has detected 3 Warning Sign with WEN.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

The Wendy's Co (NASDAQ:WEN) opened 74 new restaurants globally in the first quarter, with over 60% of these openings occurring internationally, aligning with their long-term strategy.
International same-restaurant sales grew by 2.3%, and systemwide sales increased by 8.9%, showcasing strong international performance.
The company returned more than $173 million to shareholders through dividends and share repurchases, highlighting a commitment to shareholder value.
The Wendy's Co (NASDAQ:WEN) is investing in technology, including digital menu boards and AI order-taking, to enhance customer experience and restaurant productivity.
The company is focused on strategic collaborations and innovations, such as the Thin Mint Frosty and upcoming Takis collaboration, to drive customer engagement and traffic.

Negative Points

Global same-restaurant sales declined by 2.1%, leading to a 1.1% decrease in global system sales, reflecting challenges in the consumer environment.
US same-restaurant sales were down 2.8%, driven by decreased traffic and adverse weather conditions impacting performance.
The Wendy's Co (NASDAQ:WEN) revised its full-year outlook, now anticipating global systemwide sales to be flat to down 2%, indicating a cautious approach due to market uncertainties.
US company-operated restaurant margins contracted by 50 basis points year-over-year, affected by sales deleveraging, higher commodity costs, and wage inflation.
The company faces pressure from a challenging consumer environment, with consumer confidence deteriorating and impacting demand, particularly among households earning below $75,000.

Q & A Highlights

Q: Given the tempered 2025 guidance, how do you see the quick service restaurant (QSR) industry positioned in the current economic environment, and are you confident in your current value platform? A: Kirk Tanner, President and CEO, noted that the consumer is under pressure, which is reflected in the Q1 numbers. Wendy's is focusing on controlling what they can control and believes they have the right to win in the marketplace with their 100 days of summer program. They are balancing core innovation, value, and customer experience to attract consumers, emphasizing the quality of their value meal offerings.

Q: Can you provide insights into the consumer data and where you see the biggest improvements happening? A: Kirk Tanner highlighted that operational excellence and customer experience are key focuses. They are deploying tools to improve order accuracy and hospitality, which are major drivers of customer satisfaction. Early results show improvements in these areas, and they are working closely with franchisees to enhance the customer experience.

Q: What is the outlook for unit development, and how is franchisee demand in the current environment? A: Kirk Tanner stated that they are off to a good start with unit development, with over 60% of new units coming from international markets. They have a strong pipeline for 2025 and beyond, focusing on restaurant-level economics and engaging with franchisees. They are confident in their growth strategy and are investing in their Build-to-Suit program.

Q: How did the first quarter performance unfold, and what were the key factors affecting it? A: Ken Cook, CFO, explained that the first quarter was impacted by adverse weather and a pullback in consumer demand. While they saw positive trends with the Thin Mint Frosty launch, consumer confidence fell in March, leading to reduced demand. They are grounding their full-year outlook in recent trends and focusing on executing their programming to win in the market.

Q: How are you leveraging collaborations and limited-time offers (LTOs) to drive growth, and what are the plans for 2025? A: Kirk Tanner emphasized the importance of balancing core offerings, innovation, and value. Collaborations like SpongeBob and upcoming partnerships with brands like Takis are designed to connect with consumer passion points and drive traffic. They are intentional about these partnerships to attract specific customer groups and build brand love.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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