Wendy’s (WEN)

Earlier today (Thursday), Wendy’s reported second-quarter adjusted EPS of $0.27. This was one cent better than our $0.26 estimate, and matched sell-side consensus (according to Consensus Metrix) of $0.27.

This morning, we published an industry report entitled “Updating our Q2 Kalinowski Quick-Service Burger Same-Store Sales Index.” We encourage you to read that report in conjunction with this Wendy’s note.

Back on April 3rd, we published a Wendy’s report looking at changes in menu prices for two different combos sold at 25 of its restaurants in California over the 2/12/24-4/2/24 time frame:

Earlier today (Thursday), Wendy’s reported adjusted Q1 EPS of $0.23, coming in above our $0.21 forecast and sell-side consensus (according to Consensus Metrix) of $0.21. Adjusted EBITDA reached $125.6 million in Q1. This was better than our $122.3 million forecast and consensus of $124.2 million.

Over the course of this week, we have previously published notes detailing menu-price increases at 25 Chipotle Mexican Grill restaurants in California, 20 Starbucks locations in California, and 25 Taco Bells in California. Those notes are available at:

Earlier today (Thursday), Wendy’s reported Q4 2023 adjusted EPS of $0.21. This was short of our $0.24 forecast, and also below sell-side consensus (according to Consensus Metrix) of $0.23.

We believe that January has proven a tough month as regards same-store sales for a wide swath of the restaurant industry, including the quick-service burger sector. Based on our conversations with industry contacts, bad weather – lapping a mild winter from one year ago – clearly seems to be the #1 reason behind the challenged January sales trends. As of today, it’s possible that February could prove to be similarly challenged.

Earlier today (Thursday), Wendy’s reported adjusted Q3 EPS of $0.27. This was better than our $0.25 forecast and sell-side consensus (according to Consensus Metrix) at $0.25.

Earlier today (Wednesday), Wendy’s reported adjusted second-quarter EPS of $0.28. This matched our $0.28 forecast and was one cent above sell-side consensus (according to Consensus Metrix) of $0.27. Second-quarter adjusted EBITDA came to $144.5 million. This was above our estimate of $140.8 million, as well as consensus of $141.7 million.

Wendy’s plans to report its second-quarter results before the market open on Wednesday, August 9th. We do not know to what degree, if any, Wendy’s will discuss third quarter-to-date same-store sales trends on the related conference call that morning.

Wendy’s first-quarter U.S. same-store sales rose by +7.2%, coming in better than consensus. On its May 10th conference call, Wendy’s commented “We remain fully committed to driving the restaurant economic model through our three long-term growth pillars; driving sales momentum, accelerating our digital business and expanding our global footprint. This commitment, and our successful start to the year, give us confidence that we will deliver meaningful global growth for the remainder of 2023 and beyond…. As we turn to the second quarter, we will promote products across a variety of price points and occasions with dedicated messaging behind our ownable Biggie Bag platform, the return of the fan-favorite Strawberry Frosty and bringing the heat like only Wendy’s can with the addition of the Ghost Pepper Ranch Chicken Sandwich to our Made to Crave lineup. We also have plans in place to accelerate our momentum at the bookends of the day; breakfast and late night.”

Earlier today, Wendy’s reported first-quarter adjusted EPS of $0.21. This matched our $0.21 forecast, and is one cent above sell-side consensus (according to Consensus Metrix) of $0.20. First-quarter adjusted EBITDA amounted to $125.6 million. This was above our $122.9 million estimate and consensus of $121.6 million.

On its March 1st conference call, Wendy’s management commented that “we are building upon this foundation with the launch of our new Pacesetter development incentive program in the U.S. and Canada. Pacesetter will approximately double the incentive offered in our previous program, while increasing the royalty rate for new restaurants built under these development agreements to 5%.”

Earlier today, Wendy’s reported adjusted Q4 EPS of $0.22, coming in ahead of our $0.19 forecast and sell-side consensus (according to Consensus Metrix) of $0.20. Fourth-quarter adjusted EBITDA was $123.5 million, which had been pre-announced back on January 13th. Also pre-announced at that time was Q4 U.S. same-store sales growth of +5.9%.

Earlier today, Wendy’s pre-announced its Q4 results, and updated its capital allocation plans. Overall, we view most of the key points as positive for Wendy’s, although we do note that its largest shareholder is no longer considering acquiring Wendy’s outright. While we believe this outcome was widely anticipated on the Street, it may still hamper the stock in trading today. Nevertheless, we’d remain buyers of WEN.

Earlier today, Wendy’s reported adjusted Q3 EPS of $0.24, coming in slightly above our $0.23 forecast and sell-side consensus (according to Consensus Metrix) of $0.23. Wendy’s targets full-year 2022 adjusted EPS of $0.84-$0.88, which by our math implies a Q4 target range of $0.19-$0.23. We stick with our $0.22 EPS estimate for Q4E; consensus as of this writing is at $0.21.

Earlier today, Wendy’s reported adjusted Q2E EPS of $0.24, matching our $0.24 forecast, and coming in above sell-side consensus (according to Consensus Metrix) of $0.22. Wendy’s bumps up its full-year 2022 adjusted EPS target range to $0.84-$0.88 (previously $0.82-$0.86).

After yesterday’s market close, Wendy’s largest shareholder — Trian Fund Management LP, which owns about 19% of WEN — disclosed that it may seek to acquire Wendy’s. That news has sent up shares of WEN by about +11% in today’s regular trading session, as of this writing. Should investors buy more stock in WEN, in this context?

Kalinowski Equity Research invites institutional investors to participate in our latest “Ask the Experts” video call, to take place on Thursday, June 16th starting at 2:00 PM Eastern time. The featured speaker will be Wendy’s CFO Gunther Plosch. If you are interested in joining the call, please e-mail [email protected] or your sales contact.

Earlier today, Wendy’s reported adjusted Q1 EPS of $0.17. This was one cent short of our $0.18 forecast and sell-side consensus (according to Consensus Metrix) of $0.18.

Earlier today, Wendy’s reported adjusted Q4 EPS of $0.16, coming in one cent ahead of our $0.15 estimate, and one cent above sell-side consensus (according to Consensus Metrix) of $0.15. Adjusted EBITDA in Q4 reached $102.7 million, close to consensus of $103.5 million.

Based on our channel checks, we adjust our Q4E Wendy’s U.S. same-store sales forecast.

Earlier today, Wendy’s reported Q3 adjusted EPS of $0.19, coming in one cent above our $0.18 forecast and sell-side consensus (according to Consensus Metrix) of $0.18. Third-quarter adjusted EBITDA amounted to $122.2 million, close to consensus of $122.9 million.

Bank robber Willie Sutton reportedly replied — when asked why he robbed banks — “Because that’s where the money is.” Similarly, why is Wendy’s taking aim at privately-held Dunkin’ in its efforts to build its breakfast business? Because that’s where the market share is.

Earlier today, Wendy’s reported adjusted Q2 EPS of $0.27, coming in well ahead of our $0.18 forecast and sell-side consensus (according to Consensus Metrix) of $0.18.

Earlier today, Wendy’s reported (adjusted) Q1 EPS of $0.20, above our $0.15 forecast and sell-side consensus (according to Consensus Metrix) of $0.15.

With this report, we increase our Q1E U.S. same-store sales forecast for Wendy’s by +150 basis points, to +11.5%. According to Consensus Metrix data, this becomes the new “high on the sell-side forecast.” Sell-side consensus is presently at +10.0%.

Earlier today, Wendy’s reported Q4 2020 adjusted EPS of $0.17. While this was one cent better than our $0.16 forecast, it still came in one cent below sell-side consensus (according to Consensus Metrix) of $0.18. Wendy’s indicates that the EPS number was ahead of its internal plan.

Wendy’s plans to release its Q4 2020 earnings before the market open on Wednesday, March 3rd. How do WEN shares tend to trade heading into earnings, and on the day of an earnings release?

With this note, we raise our full-Q1E Wendy’s U.S. same-store sales forecast by +300 basis points, to +10.0%. According to Consensus Metrix, sell-side consensus for Q1E as of this writing is at +7.3%.

With this report, we update our data-driven Kalinowski Quick-Service Burger Index for Q4E to +4.5%. This figure is based on our latest proprietary checks/data as regards same-store sales performance for this segment during October, November, and December. While we believe that sector same-store sales were fairly similar in each of these three months, it appears that November was the best of the three, and December the worst of the three, although all three ended up in the positive midsingle digits.

Earlier this week, Kalinowski Equity Research hosted its latest “Ask the Experts” conference call — this time around, featuring Wendy’s. The call included multiple participants from Wendy’s, including CFO Gunther Plosch and Greg Lemenchick, Senior Director – Investor Relations and Corporate FP&A. We thank them for their time!

Based on our data-driven checks, we believe that same-store sales for U.S. chain restaurants in the casual dining, family dining, and fine dining segments are all showing sequential deceleration for the first half of November relative to fullOctober. This new trend follows 5-6 consecutive months of either sequentially improving full-service same-store sales (or at least not meaningfully deteriorating sequential same-store sales).

Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place today — Monday, November 16th — starting at 1:00 PM Eastern time. The featured speakers will be Wendy’s CFO Gunther Plosch; and Greg Lemenchick, Senior Director – Investor Relations and Corporate FP&A.

Earlier today, Wendy’s reported Q3 adjusted EPS of $0.19, which exceeded our $0.16 forecast and sell-side consensus (according to Consensus Metrix) of $0.17. Drivers of the outperformance included better-than-expected restaurant-level margins (16.9% actual vs. our 15.3% projection and consensus at 15.6%) and G&A/ Revenues (10.5% actual vs. our 11.1% forecast and consensus at 11.0%). Thirdquarter adjusted EBITDA reached $118.8 million, above our $108.8 million estimate and also above consensus of $112.0 million. These results are impressive given the extra marketing spend of about $6.2 million focused on the breakfast daypart that was made in Q3 (and for which we expect ~$6.5 million in Q4E).

Based on our math, it looks like Wendy’s is in the process of decisively overtaking Burger King (owned by Restaurant Brands International [QSR; Not Rated]) as the 2nd-largest burger concept in the U.S., based on domestic systemwide sales.

With this report, we update our data-driven Kalinowski Quick-Service Burger Index for Q3E to +3.6%. This figure is based on our latest proprietary checks/data as regards same-store sales performance for this segment during July 2020 and August 2020, as well as our best guess for what September 2020 is bringing us. The approximate monthly figures we use are +2% to +3% for July 2020, +3% to +4% for August 2020, and approximately +6% for September 2020.

Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place on Monday, November 16th starting at 1:00 PM Eastern time. The featured speakers will be Wendy’s CFO Gunther Plosch; and Greg Lemenchick, Senior Director – Investor Relations and Corporate FP&A. If you are interested in joining the call, please e-mail [email protected] or your sales contact.

FYI, this note is best read with the Wendy’s (WEN; Buy, $22.39) report we published earlier today, entitled “WEN: It is Called the “Most Important Meal of the Day,” After All…”

Earlier today, Wendy’s (WEN; Buy, $23.81) reported adjusted EPS of $0.12, matching our recently-raised $0.12 forecast, and coming in one cent above sell-side consensus (according to Consensus Metrix) of $0.11. Although company-operated restaurantlevel margins in Q2 at 14.4% were down year-over-year, they still amounted to a figure above our 12.0% projection and consensus of 11.3%. Wendy’s cites “a higher average check, labor efficiencies, and other dining room closure related efficiencies” as positive factors. Management also pointed to quicker drive-thru speeds.

With this report, we upgrade the shares of Wendy’s (WEN) to Buy (from Neutral). The reasons for our upgrade include: (1) U.S. same-store sales trends that look better than the Street may expect (particularly for July, which may have positive implications for momentum for Q3 as a whole), (2) the possibility that the 5% or so of the Wendy’s worldwide store base that is company-owned produced higher-thananticipated restaurant-level margins in Q2 (and if so, what this may imply about the possibilities for such margins in Q3 and Q4), and (3) the recent nationwide launch of the Wendy’s Rewards loyalty program, which could help spur sales better than they otherwise would be through Q2 2021.

The Wendy’s Rewards loyalty program isn’t the only initiative Wendy’s (WEN; Neutral, $21.43) has on tap for the near future. We look for Wendy U.S. to launch a Pretzel Pub Burger, a Pretzel Pub Chicken Sandwich, and Pretzel Pub Fries — likely fairly soon, and nationwide. After an approximate five-year hiatus from when it last sold the Pretzel Bacon Cheeseburger and the Pretzel Pub Chicken Sandwich, Wendy’s likely has some pent-up demand amongst its guests for these menu items’ return.

Wendy’s (WEN; Neutral, $21.66) is getting closer than ever to launching its loyalty program — apparently to be called “Wendy’s Rewards” — for U.S. guests. On Wendy’s May 6th conference call, CEO Todd Penegor stated that “As we have stressed before, frequency remains an opportunity for us. And it will be more important than ever, as normal routines resume in the months to come. We will be looking to our loyalty program to help us solve for this, and the team has been preparing diligently for a launch in the near future. We believe that we have built a loyalty program that people will love. And we could not be more excited to get this into the hands of our customers.”

After today’s market close, Wendy’s (WEN; Neutral, $22.65) published a business update, including a -1.9% U.S. same-store sales number for May 4-31, and noting that global same-store sales “for the last week of May turned positive in the low-single digit range.” This strongly suggests that U.S. same-store sales were positive the last week of May, as U.S. same-store sales have been running ahead of global same-store sales by roughly 130-140 basis points as of late.

With this report, we change our rating on the shares of Wendy’s (WEN) to Neutral (from Buy). Our ratings change largely reflects two factors: (1) a possible slowdown in U.S. same-store sales momentum given recent media attention about alleged beef shortages at Wendy’s, and (2) the stock’s rise from $7.47 as of the March 13th market close to $20.78 as of yesterday’s (May 13th’s) market close. Shares of WEN have also outperformed the S&P 500 by 5-6 percentage points year-to-date, despite being in what is arguably one of the more challenged industries in a COVID-19 world.

Earlier today, Wendy’s (WEN; Buy, $20.07) reported Q1 adjusted EPS of $0.09, ahead of our $0.07 forecast, and in line with sell-side consensus (according to Consensus Metrix) of $0.09. First-quarter adjusted EBITDA of $89.3 million matched consensus.

We lower our U.S. same-store sales estimates for Wendy’s (WEN; Buy) as follows:
Q1E 2020: down by -4.8 percentage points to +0.2%
Q2E 2020: down by -22 percentage points to -15.0%
Q3E 2020: down by -11.5 percentage points to -5.0%
Q4E 2020: down by -7 percentage points to 0.0%
Full-year 2020E: down by -6.4 percentage points to -5.0%
Full-year 2021E: up by +5 percentage points to +8%

Earlier today, Wendy’s (WEN; Buy, $22.49) reported Q4 2019 adjusted EPS of $0.08. Although this was short of our $0.10 forecast, it did match sell-side consensus (according to Consensus Metrix) of $0.08.

We recently sampled Wendy’s (WEN; Buy) PBC (Plant-Based Chicken sandwich), that was tested in some (but not all) restaurants in the Orlando market in very late December and early-to-mid January. We maintain our Buy rating on WEN, and briefly note some of our observations:

With Wendy’s (WEN; Buy) planning to launch a nationwide breakfast business in Q1 2020, and aiming to generate $1 billion in annualized sales from this initiative fairly quickly, we thought it might be wise to examine exactly which restaurant concepts out there might be most at risk from share loss from Wendy’s breakfast launch — and to what (quantified) degree. In our view, the publicly-traded concepts most at risk include McDonald’s (MCD; Neutral), Burger King (owned by Restaurant Brands International [QSR; Not Rated]), and Dunkin’ (owned by Dunkin’ Brands Group [DNKN; Neutral]).