Wendy's on track to reimage 200 restaurants this year

May 8, 2013

The Wendy's Company today reported unaudited results for the first quarter ended March 31, including a same-store sales increase of 1 percent at company-operated North American stores.

Other highlights include:

  • Consolidated revenues increased to $603.7 million in the first quarter of 2013, compared to $593.2 million in the first quarter of 2012.
  • Franchise same-store sales in North America increased 0.6 percent during the quarter.
  • Company-operated North America restaurant margin increased 100 basis points to 12.8 percent in the first quarter of 2013, compared to 11.8 percent in the first quarter of 2012. The margin improvement was due primarily to higher same-store sales, including rollover pricing and favorable product mix, along with reductions in beverage costs and breakfast advertising expense.
  • Adjusted EBITDA increased 21.0 percent to $77.3 million in the first quarter of 2013, compared to first quarter 2012 Adjusted EBITDA of $63.9 million.
  • Net income attributable to The Wendy's Company was $2.1 million in the first quarter of 2013, compared to $12.4 million in the first quarter of 2012. The first-quarter 2012 results included an $18 million after-tax net gain on the sale of an investment.

"Our solid first-quarter profitability increase was in line with our expectations," said Emil Brolick, president and CEO. "The momentum from our 'Recipe to Win' brand transformation, Image Activation progress and results from our new 'Right Price, Right Size Menu' translated into strong earnings growth in the first quarter. We generated positive same-store sales and overcame the negative impact from the New Year and Easter holiday shifts, as well as adverse weather conditions."

The company has also received positive consumer response to its new Flatbread Grilled Chicken platform, introduced in April. However, Brolick adds, the price-value component of the business

Wendy's is accelerating its brand transformation, including the introduction of a new logo, uniforms, menu boards and packaging in March.

As of April 30, the Wendy's system had opened a total of 86 new and reimaged Image Activation restaurants since the program began, and the company continues to expect to reimage 50 percent of its company-operated restaurants by the end of 2015.

"Consumer reaction to our Tier One reimages that we started in 2011 and accelerated in 2012 has produced very positive traffic and sales growth. Early response to our Tier Two and Tier Three reimages, which have lower investment costs, is also positive, and we expect to see an increase in these openings throughout 2013," Brolick said.

Included in the company's 2013 outlook is:

  • Average same-store sales growth of 2.0 to 3.0 percent at Wendy's North America company-operated restaurants.
  • New restaurant development and restaurant closures as follows: North America Company-operated: 25 openings with 20 to 30 closures; North America franchise: 40 openings with 90 to 100 closures; and International: 60 openings with 15 to 20 closures.
  • The reimaging of 100 Company-operated restaurants.
  • Approximately $10 million in incremental year-over-year G&A expense associated with the company's Image Activation franchisee incentive program, which includes the planned reimaging of 100 franchised restaurants in 2013. The company expects to record this expense in the fourth quarter.
  • Company-operated restaurant margin of 14.2 to 14.5 percent, compared to 14.0 percent in 2012. This estimate includes the benefit of same-store sales increases, Image Activation sales, discontinuation of breakfast at certain restaurants and cost-savings initiatives. It also assumes a 90 to 120 basis-point impact from higher commodity costs, primarily in the second half of the year, driven by rising beef and chicken costs.

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Topics: Marketing / Branding / Promotion , Operations Management , Restaurant Design / Layout

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