Article

Wendy's Q2: Better-than-expected results in unprecedented times

Wendy's Q2 results are better than analysts' predictions.

Logo: File/provided

August 5, 2020

For Wendy's, the second quarter that ended June 28 was far from good, but given the pandemic's overpowering effects over the three-month period, the news wasn't as bad as some expected. While U.S. same-store sales dropped 4.4% year-over-year for the quarter, they beat the 5.6% anticipated by market analysts, according to the company's earnings report released Wednesday. As the markets opened Wednesday and the company's earnings call took place, the brand's share price was up about 20 cents from yesterday's close, to $24 at 9:25 a.m.

Systemwide same-store sales fell 5.8% compared to growth of 1.6% last year's period, which was nothing to cheer about but not as bad as the double-digit drops some QSRs have reported for the period. And most of the drag pulling same-store sales down over the quarter came from the 18.4% drop at international locations.

Total revenues for the period fell 7.6% year-over-year to $402.3 million, which means the chain's revenues were down 4.3% for the year-to-date from last year. Other period highlights include:

• 24.6% drop in operating profit for the quarter to $60.7 million.
• 17.3% drop in adjusted EBITDA to $97.4 million
• 33.3% decline in adjusted EPS to 12 cents per share.
• Global systemwide sales down from $2,804 million last year's quarter to $2,624 million this year.
• Total net new store openings dropped from nine total last year's quarter to one this year

The overall "not-so-bad" performance of the company was anticipated to some degree by foot traffic analysis firm, Placer.ai, which said the Columbus, Ohio-based chain's July visits foretold a relatively health recovery trajectory.

"The week of July 6, Wendy's saw visits that were down just 22.7%, compared to visits down 33.3% the week of June 1," Placer.ai reported in an email to QSRweb.

Just for a comparison, Placer.ai said that chains like Wingstop, showed a 36.7 year-over-year drop in foot traffic the week of July 6,,compared to visits that were down 43.1% the week of June 1. Both brands' trends were deemed fairly good, but Wendy's clearly outpaced Wingstop in that comparison.

As for Wendy's leadership, President and CEO Todd Penegor expressed sincere appreciation at the work and workers behind those numbers.

"I continue to be extremely proud of, and humbled by, the tireless efforts and dedication from our employees, franchisees and supplier partners across the globe as we successfully manage through COVID-19," Penegor said, in the release. "Our business and restaurant economic model continue to show incredible resilience as we build momentum with U.S. same-restaurant sales accelerating to high-single digit growth in July, driven by the continued strength of our breakfast and digital businesses.

"We remain focused on our goal of delivering efficient, accelerated growth behind our three major long-term growth pillars: building our breakfast daypart, growing our digital business, and expanding our International footprint. We have positioned ourselves to manage through future challenges and ultimately emerge as a stronger Wendy's brand. I'm more confident than ever that we will achieve our vision of becoming the world's most thriving and beloved restaurant brand."

Although the pandemic caused Wendy's (and many other brands) to withdraw its outlook for the 2020 fiscal year that was issued on Feb. 26, as well as its 2021-2024 long-term outlook, the company said it will provide an updated outlook "when it can reasonably estimate the impact of the COVID-19 pandemic and changing market conditions." No timetable was provided.