News

Wendy's Q2 results equal 14th consecutive quarter of same-store sales growth

August 10, 2016

Wendy's second-quarter financials for the period ending July 3, are in and show continued positive growth for the chain although not as much as leadership said it would have liked. Same-store sales increased 0.4 percent, but overall revenues were down for the quarter, according to a news release. 

"The North America system has now recorded 14 consecutive quarters of positive same-restaurant sales, which demonstrates the long-term strength and relevance of our brand," President and Chief Executive Officer Todd Penegor said in a news release. "We also believe that momentum from our strategic growth initiatives and continued improvement in key brand health metrics, such as quality and value perception, will set us up for sustainable growth in the future.

"In the second quarter, we were able to maintain strong performance on the bottom line even as sales came in lower than we anticipated. While we are not fully satisfied with this outcome, this is a testament to the improved quality of our earnings as a result of transitioning to a predominantly franchised model, with royalties and rental income contributing a higher amount of earnings."

Chief Financial Officer Gunther Plosch added that the brand is nearing completion of its system optimization initiative's third phase and, as a result, leadership is focused on growing adjusted EBITDA margin. 

"We have added this key metric to our 2020 goals to signify how important this measure will be to our business going forward," he said in a news release. "Based on a review of all revenues and costs, we are now increasing our long-term adjusted EBITDA margin target. We will provide details on the timing and progress in early 2017."

Aside from the previously reported same-store sales increase in North America, revenues came in at $382.7 million in the second quarter of 2016 —  a 21.8 percent decrease from the previous year's period — which resulted mostly from the existence of fewer company-operated stores this year, according to the company.

Franchise revenues were $123.5 million compared to $104.5 million for the same period last year — an 18.2 percent increase that the chain attributes to higher rental income and royalty revenue resulting from the system optimization initiative.

North America company-operated restaurant margin was up 370 basis points to 21.9 percent, compared to 18.2 percent in Q2 2015 as a result of lower commodities prices and a lift from the brand's image activation program, according to a news release. Operating profit increased 2 percent to $65.6 million mostly due to higher franchise revenues, decreased depreciation and amortization, and lower impairment of long-lived assets. 

The company reported that adjusted EBITDA margin improved 550 basis points to 26.8 percent in Q2 2016, which leadership attributes to the positive effects of Wendy's system optimization initiative. Reported diluted earnings per share from continuing operations were $0.10. compared to $0.07 in the second quarter of 2015. That increase was attributed to a 27.1 percent year-over-year reduction in the weighted average diluted shares outstanding.