Wendy’s Sales Slow In Second Quarter
The Wendy’s Co. (NASDAQ:WEN) appears to be struggling with slowing sales growth. The company reported on Wednesday that same-store sales rose 0.4 percent in the second quarter. Analysts had expected 1.9 percent growth. Same-store sales rose 3.6 percent in the first quarter.
Wendy’s had lower restaurant sales from company locations in the quarter due to having fewer locations. The company operated 361 fewer restaurants in the second quarter. Revenue fell 21.8 percent to $382.7 million in the quarter. The company reported revenue of $489.5 million in the same period a year ago. Adjusted earnings decreased 1.7 percent, to $102.5 million, from $104.3 million the previous year.
Wendy’s also lowered its sales expectations for the full year, reducing its same-store sales guidance for the full year to 1 percent to 2 percent. The company previously predicted same-store sales growth of 3 percent for the period. After increasing in each quarter in 2015, traffic momentum has slowed this year. According to data from market research firm The NPD Group, quick-service traffic rose just 0.2 percent in the second quarter.
The widening gap in prices between restaurants and grocers has hurt quick-service chains’ sales. The gap between the cost of eating at home and cost of dining out is at its widest point since the recession. That gap is encouraging more consumers to eat at home. Consumers’ growing desire for healthier options have also caused problems for many in the industry. Many customers regard newer operators such as Shake Shack, Chipotle and Panera as a better choice, despite their higher prices.
Many quick-service chains are trying out new menu items and discounts to attract customers. Wendy’s used a combination of limited-time offers and its 4-for-$4 value offer. Burger King now sells hot dogs in the U.S. McDonald’s has launched all-day breakfast and is planning to introduce more fresh ingredients.
Wendy’s has 315 company-owned locations available to sell to franchisees, and announced on Wednesday that it has buyers for all of those restaurants. Those sales are expected to be completed by the end of the year. Wendy’s is also acting as a third party in sales of franchisee-owned locations to other franchisees. The company made 13 transfers of locations in the second quarter and expects to make 200 of the deals this year. Wendy’s wants to limit its ownership to just about 5 percent of its 6,500 locations.