Competition, hurricanes dampen Wendy’s results
NEW YORK — Wendy’s Co. reported lower-than-expected quarterly profit and sales as increased competition, lower grocery prices and hurricanes hit traffic at restaurants, leading the burger chain to cut its full-year adjusted earnings per share forecast.
The company’s shares were down 3.5% to $14.22 in morning trade on Wednesday.
Wendy’s also said higher commodity costs hurt profit margins by 1.7 percentage points during the quarter.
Commodities such as beef, bacon and chicken account for a large share of the company’s input costs, but Chief Financial Officer Gunther Plosch said high prices in the quarter were probably just a “one-time bubble.”
“Beef and chicken are each about 20% of the commodity basket for Wendy’s, so this has been a margin headwind,” Evercore ISI analyst Matt McGinley said.
Wendy’s, like its peers in the fast-food industry, is also dealing with a slide in grocery prices that is encouraging more consumers to prepare meals at home or use meal- kit delivery services such as Blue Apron, HelloFresh and Plated.
This has intensified competition, with Wendy’s, McDonald’s and Burger King offering deeply discounted meals to get more customers to visit their outlets.
Wendy’s is also launching delivery services under a partnership with DoorDash, Inc., it said.
The company trimmed its fullyear adjusted profit forecast to 43 cents to 45 cents per share for fullyear, from 45-47 cents it estimated earlier, blaming an unexpected rise in deferred tax expense.
In the third quarter, Wendy’s same- restaurant sales in North America rose 2% in the third quarter but came in below the 2.4% increase forecast by Consensus Metrix.
The burger chain, which has the highest number of its restaurants in Florida and Texas, said hurricanes Irma and Harvey reduced same- store sales in North America by 30 to 40 basis points.
The company also trimmed the higher end of its North American comparable- store sales forecast for the year to 2% to 2.5% from 2% to 3%.
Wendy’s sold 249 restaurants to franchisees in the quarter, resulting in a 15.4% drop in sales to $308 million. Analysts had expected $311.9 million, according to Thomson Reuters I/B/E/S.
Excluding some items, earnings were nine cents per share, missing analysts’ average estimate of 12 cents per share. —