Wendy's Profit, Revenue Slide
August 10 2016 - 09:10AM
Dow Jones News
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)
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