Com­pe­ti­tion, hur­ri­canes dampen Wendy’s re­sults

Business World - - WORLD BUSINESS -

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. —

A WENDY’S fast-food restau­rant is seen in Los An­ge­les, Cal­i­for­nia, Nov. 7.

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