Yahoo Finance The Wendy's Co (WEN) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Global Same-Restaurant Sales Growth: Increased by 90 basis points during the quarter, reaching 8.9% on a 2-year basis.
International Same-Restaurant Sales Growth: Achieved 3.2% growth, marking a 12th consecutive quarter of double-digit 2-year growth at 17.1%.
U.S. Same-Restaurant Sales Growth: Grew by 60 basis points, totaling 7.8% on a 2-year basis.
Global Digital Sales Mix: Reached nearly 17%, with a year-over-year increase of over 30% in digital sales.
U.S. Company-Operated Restaurant Margin: Increased by 60 basis points year-over-year to 15.3%.
New Restaurant Openings: Opened 35 new restaurants globally during the quarter.
Adjusted EBITDA: Increased by 1.8% to approximately $128 million.
Adjusted Earnings Per Share: Increased by almost 10% due to fewer shares outstanding and an increase in adjusted EBITDA.
Free Cash Flow: Decreased due to incremental investment in breakfast advertising.
2024 Financial Outlook: Reaffirmed, expecting global same-restaurant sales growth of 3% to 4%, and free cash flow growth to approximately $280 million to $290 million.
Dividend: Declared a second quarter dividend of $0.25 per share, with an expected full year dividend of $1 per share.
Share Repurchase: Repurchased approximately 0.6 million shares with about $298 million remaining on the authorization.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
The Wendy's Co (NASDAQ:WEN) reported a 90 basis point increase in global same-restaurant sales, with a 2-year basis growth of 8.9%, indicating strong ongoing performance.
Digital sales momentum continued to be strong, with nearly 17% global digital sales mix and significant year-over-year increases, highlighting effective digital strategy implementation.
The Wendy's Co (NASDAQ:WEN) opened 35 new restaurants globally in Q1, aligning with their expansion strategy and supporting future growth.
U.S. company-operated restaurant margin improved by 60 basis points year-over-year to 15.3%, driven by pricing strategies and operational efficiencies.
The Wendy's Co (NASDAQ:WEN) reaffirmed its 2024 financial outlook, expecting continued strong global system-wide sales growth and significant free cash flow, demonstrating confidence in their strategic plans.
Negative Points
Despite overall growth, there was a noted decline in customer counts, which was only partially offset by pricing strategies aimed at average check growth.
The increase in General and Administrative (G&A) expenses, driven by higher employee compensation and stock compensation, could impact profitability if not managed effectively.
The Wendy's Co (NASDAQ:WEN) faces challenges in the U.K. market, with investments there negatively impacting consolidated margins by approximately 60 basis points.
Projected restaurant closures of over 100 for the year could indicate challenges in maintaining a stable operational footprint.
While digital sales are growing, the heavy reliance on digital platforms and promotions may necessitate continuous investment to maintain engagement and competitiveness.
Q & A Highlights
Q: It seems like the base case assumption from an industry perspective is that many feel the need to get more aggressive on value, which historically has caused more of a street fight dynamic within the quick service industry. How do you feel that Wendy's is positioned if this is an environment that unfolds with intensity? And what weapons can you use to compete in a more value-focused environment? A: Kirk Tanner, President and CEO, explained that Wendy's is well-prepared with its Biggie platform offering everyday value, and the company leverages digital communication to drive value and build loyalty. He emphasized the balanced menu structure, which allows Wendy's to cater to various consumer segments effectively.
Q: Can you discuss the unit growth outlook, especially considering the challenging macro environment and potential hesitance from franchisees to invest in growth? A: Kirk Tanner noted that Wendy's is on track with its unit growth, expecting a 2% increase this year and aiming for 3-4% in the following years. He highlighted the strong return on investment for new restaurants and the company's efforts to support franchisees in accelerating growth.
Q: Could you comment on the closures of some units in the first quarter and how that factors into your outlook? A: CFO Gunther Plosch confirmed that the closures were within expectations, aligning with the company's business rhythm. He reiterated the plan to open 250 to 300 new restaurants this year, with a bit more than 100 closures, aligning with their growth guidance.
Q: What is the franchisee cash flow per restaurant, and how do returns on new units look before considering any incentives? A: Gunther Plosch did not provide specific cash flow figures but mentioned improvements in franchisee profitability and leverage ratios. He discussed the controlled building costs and competitive returns on new units, highlighting the strong interest from franchisees in joining and expanding within the system.
Q: With the focus on digital sales and the impressive results in the quarter, were there any surprises, or did it go as planned? What does this mean for the strategy going forward? A: Kirk Tanner expressed satisfaction with the digital performance, noting it was in line with plans and highlighted the potential for further growth. He emphasized the benefits of digital orders, including higher average order values, and the company's commitment to enhancing its digital and loyalty platforms.
Q: Can you provide insights into the commodity basket outlook for the rest of the year, especially with the recent spike in hamburger prices? A: CFO Gunther Plosch stated that the commodity outlook remains unchanged with flat inflation expected. He detailed that about 80% of the commodity basket is locked down, with beef and fries seeing inflation and chicken being deflationary. He reassured that the company is well-prepared to manage these conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
