News

Wendy's wraps Q3 with 15 consecutive quarters of sales growth

November 9, 2016

The Wendy's Company reported positive unaudited Q3 results, this morning, for the period ending Oct. 2. The chain's board also gave the nod to an 8 percent quarterly dividend rate increase and same-restaurant sales continued to grow, marking the 15th consecutive quarter of increased same-restaurant sales. 

Other highlights of the Q3 report include: 

• 1.4 percent growth in North American same-restaurant sales, increasing on a two-year basis for the quarter by 4.5 percent. 
• Revenues dropped 21.7 percent year over year, to $364.0 million in the third quarter primarily due to 433 fewer company-operated and owned stores. 
• Franchise revenues rose 28.2 percent to $135.4 million for Q3 this year, compared to $105.6 million in the third quarter of 2015. Higher rental income, franchise fees and royalty revenue were the primary drivers, part of the company's system optimization initiative. Increased same-restaurant sales also boosted this number.
• Restaurant margin for North America Company-operated restaurants was down to 18.4 percent in the third quarter of 2016, compared to 18.8 percent the previous year due mostly to n the third quarter of 2015. The 40 basis-point decrease was primarily the result of lower commodity costs and benefits from the Image Activation program.
• General and administrative expense was down 7.5 percent to $58.9 million.
• Q3 operating profit was up to $106.1 million, compared to $55.9 million the same period last year. This was largely due to gains from the optimization program, as well as net and higher franchise revenues.
• Continuing operations income grew substantially to $48.9 million, compared to $8.3 million in the same quarter of 2015.
• Net income grew to $48.9 million in Q3 compared to $7.6 million in 2015.
• Adjusted EBITDA from continuing operations grew to $100.2 million, compared to $99.7 million in the third quarter of 2015.  
• Reported diluted earnings per share were $0.18 for Q3, compared to $0.03 last year. 
• Adjusted earnings per share from continuing operations were $0.11, compared to $0.09 in the same quarter of 2015.

Wendy's President and CEO Todd Penegor reflected on the results in a news release, saying, "Our solid third-quarter results demonstrate the positive benefits of our brand transformation efforts. Despite the ownership of 433 fewer company-operated restaurants relative to last year, we were able to deliver high quality earnings, with franchise revenues contributing a higher amount to the bottom line. Driven by our balanced marketing approach and a continued focus on profitable customer count growth, the North America system accelerated same-restaurant sales in the third quarter. We have now recorded 15 consecutive quarters of positive same-restaurant sales."

Chief Financial Officer Gunther Plosch added, "As part of our previously announced share repurchase authorization, we intend to enter into an accelerated share repurchase transaction for $150 million. This is in addition to the approximately $185 million we have already returned to shareholders this year through share repurchases. We expect to announce the execution of an accelerated share repurchase agreement in the near future. In addition, our Board of Directors has authorized an 8-percent increase in our quarterly dividend rate, from 6 cents per share to 6.5 cents per share."

The company now expects 2016 adjusted EBITDA at the high end of its previously issued range of flat to up 1 percent compared to 2015. It also expects: 

• Same-restaurant sales growth of approximately 1.5 percent for the North America system.
• Cash flows from operations of approximately $180 to $200 million.
• Capital expenditures of approximately $145 million.
• Free cash flow (cash flows from operations minus capital expenditures) of approximately $35 to $55 million.
• Restaurant margin of approximately 19.0 percent at North America Company-operated restaurants.
• To remain on track to achieve 2020 goals.