Wendy's reported that Q1 of this year rounded out the company's strongest two-year posting in the North America system comparable sales performance in more than a decade. In fact, due to the unexpectedly positive first-quarter results, Wendy's has increased its 2016 outlook for both Adjusted Earnings per Share and Adjusted EBITDA, said Todd Penegor, Wendy's incoming president and CFO. "As we look to the second quarter, the performance of our 'four for $4' promotion remains solid with the addition of our Crispy Chicken BLT to the offering," Penegor said. "We are committed to our high-low marketing strategy and driving growth in the premium component of our business to complement the growth we have seen in the value segment. We remain confident in our full-year same-restaurant sales outlook of approximately 3 percent for the North America system and expect to generate second-quarter same-restaurant sales growth somewhat below our full-year target." First-quarter 2016 results
Note: Due to the May 2015 sale of its bakery business, the Company presented its bakery results as discontinued operations for all periods presented in its consolidated financial statements. - Same-restaurant sales increased 3.6 percent at North America system restaurants.
- Sales increased 6.8 percent for the North America system, based on a two-year period.
- First-quarter 2016 revenues were down 16.2 percent to $378.8 million, compared to $451.8 million for the same period in 2015, primarily due to 375 fewer company-operated stores during the first quarter of 2016 than in the first quarter of the previous year.
- Franchise revenues were up 26.8 percent to $119.5 million in the first quarter 2016, from those of the first quarter 2015 primarily due to higher rental income, royalty revenue and franchise fees resulting from a system optimization initiative and increases in same-restaurant sales.
- North America company-operated restaurant margin was also up to 17.2 percent in the first quarter 2016, compared to 14.7 percent in the first quarter 2015 primarily as a result of higher same-restaurant sales and lower commodity costs.
- General and administrative expense were up 8.2 percent to $64.6 million in first quarter 2016 over the same period last year due largely to a $3.7 million increase in professional fees and legal reserves, a year-over-year increase of $1.2 million in incentive compensation accruals, which were in turn, due to Wendy's first-quarter performance.
- Adjusted EBITDA from continuing operations was $98.1 million in the first quarter of 2016 — 21.4 percent over the same period last year. This, despite owning 375 fewer company-operated restaurants this year.
- The company's 2016 results include a year-over-year net positive impact of $9.6 million from a lease buyout, which was partly offset by greater professional fees and legal reserves,
- Adjusted EBITDA margin was 25.9 percent this year first quarter, which is an 800-basis point improvement..
- Operating profit grew 68.3 percent to $63.8 million in the first quarter of this year over the same period last year. Credit for this goes to the system optimization initiative and lower "other operating expense, net" partly offset by a year-over-year increase in impairment charges and higher G&A expense.
- Operating profit margin improved 850 basis points this quarter over the same last year.
- Interest expense was $28.1 million this year, compared to last because of higher total debt levels in line with the debt restructuring completed in the second quarter of 2015.
- Income from continuing operations was $25.4 million this year's quarter, compared to $18.2 million last year.
- Net income was $25.4 million this year, compared to $27.5 million during the same quarter last year.
- Reported diluted earnings per share from continuing operations were $0.09 in the first quarter of 2016, compared to $0.05 in the first quarter of 2015, partly due to a 26.4 percent year-over-year reduction in the weighted average diluted shares outstanding.
- Reported diluted earnings per share were $0.09 in the first quarter of 2016, compared to $0.07 in the first quarter of 2015.
- Adjusted Earnings per Share from continuing operations were $0.11 in the first quarter of 2016, compared to $0.06 in the first quarter of 2015.
Outlook - Leadership succession proceeding as planned with Wendy's current CEO Emil Brolick set to retire this May 26, to be succeeded in the position by current President and Chief Financial Officer Todd Penegor. Brolick is expected to continue on the board of directors.
- System optimization continues to yield positive results
- The company is on track to reduce its company-operated restaurant ownership to 5 percent of the total with plans to sell 315 restaurants to franchisees this year. This follows the sale of 826 restaurants in the last three years.
- Image Activation and new restaurant development continue
- Wendy's plans to renovate 430 locations and build 110 more in North America this year. Last year, 519 were built or remodeled.
Quarterly dividend The regular quarterly cash dividend of $0.06 per share is payable on June 15, 2016, to shareholders of record as of June 1, 2016. As of May 5, there were 266.5 million common shares outstanding. The company repurchased 4.9 million shares for $48.2 million in the first quarter at an average price of $9.87 per share. More than $1 billion in share repurchases were executed last year, with $308 million remaining on the company's share repurchase authorization, expiring at this year's end. Updated 2016 outlook
The 2016 Adjusted Earnings per Share have been increased from $0.38 to $0.40 from the prior $0.35 to $0.37. 2016 Adjusted EBITDA is also adjusted to down 1 percent to up 1 percent compared to 2015 from the previously announced down 2 percent to flat. |
