Wendy's Co. on Wednesday reported revenue and profit topped expectations in the most recent quarter and lifted the low end of its earnings guidance for the year as it continues to transform itself to a franchised model.

Still, the top and bottom declined and shares in the company fell 4.1% premarket to $9.77.

Chief Executive Todd Penegor pointed to "challenging industry conditions," but said Wendy's 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."

Same-restaurant sales at North American restaurants edged 0.4% higher in the quarter.

"In the second quarter, we were able to maintain strong performance on the bottom line even as sales came in lower than we anticipated," said Mr. Penegor. "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."

Like many of its peers, including McDonald's Corp. and Restaurant Brands International Inc. unit Burger King, Wendy's has sought a more stable cash flow and higher profits by selling its company-owned restaurants to franchisees.

Wendy's said it remains on track with its plan to reduce its company-operated restaurant ownership to roughly 5% of the total system by the end of 2016. It intends to sell a total of 315 restaurants to franchisees this year. Through the end of the second quarter, the company has sold 55 restaurants.

In all for the quarter, Wendy's posted a profit of $26.5 million, down from $40.2 million a year earlier. Per-share earnings fell a penny to 10 cents on a much lower share count following last year's $1 billion stock buyback. Excluding certain items, earnings from continuing operations rose to 10 cents a share from eight cents a share a year earlier.

Revenue slid 22% to $382.7 million, mostly owing to the ownership of 361 fewer company-operated restaurants in the period. A 33% slide in sales revenue offset an 18% increase in franchise revenue.

Analysts had expected nine cents a share in earnings on revenue of $368 million, according to Thomson Reuters.

For the year, Wendy's now expects adjusted annual per-share earnings of 39 cents to 40 cents a share, compared with its previous guidance for 38 cents to 40 cents.

Write to Anne Steele at Anne.Steele@wsj.com

 

(END) Dow Jones Newswires

August 10, 2016 08:55 ET (12:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
McDonalds (NYSE:MCD)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more McDonalds Charts.
McDonalds (NYSE:MCD)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more McDonalds Charts.