Wendy’s sales rise, thanks to digital and breakfast

But the company said that “macroeconomic challenges” kept sales from meeting its expectations.
Wendy's earnings
Photograph: Shutterstock

Wendy’s same-store sales continued to increase in the third quarter, the company said on Wednesday, as both digital and breakfast continued to drive business.

The Dublin, Ohio-based burger chain said that its same-store sales rose 2.1% in the U.S. Coming on top of a 7% increase in the same period a year ago that makes for sales that were about 9.2% higher on a two-year basis.

But sales could have been better. Executives said that sales were “impacted by macroeconomic challenges” and would have been more in line with expectations otherwise.

“Several macroeconomic factors impacted results across the entire business,” CEO Todd Penegor said on the company’s third-quarter earnings call.

Company executives said that labor challenges led to “inconsistency on hours.” Penegor said that 85% of dining rooms are open, down from 95% earlier in the year. “We did see throughput challenges with staffing tighter,” he said. Staffing is “starting to improve” a bit but “it’s tight out there.”

Margins at company locations took a hit. The company’s restaurants paid higher commodity costs and wage rates, which drove down profits even as average check increased. Company restaurant margins decreased 2.5% to 14.4%.

Commodity costs are expected to rise 4% this year, the company said, higher than it expected due to beef costs. And labor is up 7-8%, which was also higher than executives expected.

Executives said they’ve been able to get more share at breakfast, which now accounts for about 7.5% of sales, the highest level of 2021. Penegor said that Wendy’s is now the third-largest breakfast player among fast-food chains. He also said that awareness of the daypart for the chain is as high as it is with Burger King, “and they’ve had breakfast a lot longer.”

Wendy’s continues to push the daypart. It is investing $25 million behind the daypart to get people to keep trying it.

“Clearly there’s a lot of opportunity with the breakfast daypart,” Penegor said. “That’s why we’re trying to drive trial.”

In addition, the company accelerated unit growth, particularly outside the U.S. The chain added a net of 25 locations in the period worldwide, and year to date has added another 63 restaurants.

Revenues rose 4% in the period to $470.3 million. Net income rose 3.6% to $41.2 million, or 18 cents per share.

UPDATE: This story has been updated to add more information. 

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