Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Wendy's Co (WEN, Financial) reported a 1.8% growth in global system-wide sales during the third quarter, with a 6.6% increase on a two-year basis.
- The digital sales grew almost 40% year over year, with the US segment delivering over a 17% digital sales mix.
- The company opened 64 new Wendy's restaurants globally in the third quarter and is on track to meet its goal of 250 to 300 openings for the full year.
- The morning-day part sales increased by mid-single digits, and late-night sales grew at a high-single-digit percentage compared to the prior year.
- International segment achieved high-single-digit system-wide sales growth, driven by nearly 100 new restaurant openings and strong performance in the Canadian market.
Negative Points
- US company restaurant margin remained flat at 15.6% due to labor rate inflation and customer count declines.
- Adjusted EBITDA decreased by 2.9% to approximately $135 million, primarily due to increased investment in breakfast and higher general and administrative expenses.
- The company plans to close additional underperforming restaurants with AUVs of approximately $1.1 million and operating margins below the system average.
- The decrease in adjusted earnings per share was driven by lower adjusted EBITDA, increased depreciation, and a higher effective tax rate.
- The macroeconomic environment was more challenging than expected, impacting consumer behavior and sales growth.
Q & A Highlights
Q: How is Wendy's approaching unit growth, considering recent closures and international development?
A: Kirk Tanner, President and CEO, explained that Wendy's is focusing on strengthening its system by closing underperforming restaurants and targeting a 3% to 4% net unit growth, with 70% of new development internationally and 30% domestically. This strategy aims to replace outdated units with more profitable locations.
Q: Can you elaborate on Wendy's breakfast performance and future plans?
A: Kirk Tanner highlighted that breakfast is a key growth area, with sales growing faster than the overall business. Wendy's plans to continue investing in breakfast advertising and innovation, viewing it as a long-term strategic initiative to drive incremental sales and leverage restaurant operations.
Q: How is Wendy's addressing macroeconomic challenges and consumer health?
A: Kirk Tanner noted that while the macro environment remains challenging, Wendy's saw momentum in the latter half of Q3 and into Q4, providing confidence in meeting guidance and a brighter outlook for 2025.
Q: What steps is Wendy's taking to improve prime costs and operational efficiency?
A: Kirk Tanner mentioned initiatives like AI-driven drive-throughs to enhance labor efficiency and a focus on profitable menu categories like beverages. These efforts aim to optimize labor and food costs while driving profitability.
Q: How has the Krabby Patty promotion impacted Wendy's marketing strategy?
A: Kirk Tanner stated that the Krabby Patty promotion, leveraging core menu items, has been a success. Wendy's plans to continue focusing on core menu innovation, value offerings, and potential future collaborations to drive customer engagement and sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
