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French Toast Sticks drove Wendy's sales last quarter

The product is already the chain's top-selling item in the morning, leading to a "meaningful acceleration" in breakfast sales.
Wendy's breakfast
Wendy's new French Toast Sticks helped drive breakfast sales last quarter. / Photo courtesy of Wendy's.

Wendy’s sales accelerated last quarter thanks to a combination of digital sales and better sales in the morning, the company said on Wednesday.

U.S. same-store sales at the Dublin, Ohio-based burger chain rose 6.4% in the third quarter. Todd Penegor, the company’s CEO, said that the company kept its digital sales mix at about 10% during the period. He also said that sales during breakfast accelerated during the course of the period.

Wendy’s introduced French Toast Sticks during the quarter, the first new product for the company since it introduced its breakfast daypart in March 2020. 

The item has quickly become the company’s top-selling breakfast item, Penegor said.

“That led to a meaningful acceleration of our U.S. breakfast sales,” Penegor told investors on Wednesday. He said average weekly sales are nearing the company’s goal for this year of averaging $3,000 in sales per restaurant per week in the mornings. Wendy's hopes for continued morning sales thanks to a deal offering one of the chain's croissant sandwiches for $3.

Overall, Wendy's sales were driven mostly by higher prices and consumers making larger orders. But traffic was down "slightly," though executives said the brand maintained its share of overall quick-service restaurant traffic. 

Profit margins at company-operated locations decreased slightly in the period, which Wendy’s blamed on commodity costs, declines in customer count and higher labor costs. The company said its margins at company stores were 14.3% in the period, down from 14.4% in the same period a year ago.

Revenues rose 13% to $532.6 million. Net income rose 23% to $50.5 million, or 24 cents per share.

Systemwide sales at the company’s international locations rose 18.3% to $413 million in the third quarter. That was due to strong same-store sales of 10.8% outside the U.S., along with unit growth. The company added a net of 26 new locations outside the U.S. So far this year, Wendy’s has added 72 international restaurants and 59 U.S. locations.

Wendy’s has been aggressively pushing into international markets, including a major effort this year to add restaurants in the United Kingdom.

Wendy’s did lower the top end of its expectations for global sales growth this year, now expecting system sales to grow between 6% and 7% instead of between 6% and 8%. It also lowered the top end of its expectations for adjusted EBITDA, or earnings before interest taxes depreciation and amortization (now up to $500 million instead of $505 million) and cash flows (now up to $320 million instead of $325 million).

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