At Wendy's, stronger sales yield better profits

The burger chain said profit margins at company restaurants improved last quarter thanks to higher sales. But customer counts declined.
Wendy's earnings
Wendy's said company-store margins improved 270 basis points. / Photo: Shutterstock.

Wendy’s on Wednesday said its U.S. same-store sales rose 7.2%, thanks to more digital sales and the company’s marketing programs.

The sales results, executives said, helped lead to improved margins. Profit margins at company-owned locations increased 270 basis points when compared with the same period a year ago, to 14.7% of sales.

Yet customer counts continued to decline in the U.S. The company’s 7.2% domestic same-store sales growth came entirely from higher prices, along with easier comparisons from a year ago. Same-store sales increased 8.3% on a two-year stacked basis. By comparison, rival McDonald’s same-store sales rose 16.1% on a two-year basis, while Burger King’s increased 8.2%.

Revenues at the Dublin, Ohio-based chain increased 8.2% in the first quarter to $528.8 million. Net income increased 6.4% to $39.8 million, or 19 cents per share.

Wendy’s in January announced a corporate reorganization that centralized global oversight under CEO Todd Penegor. The company said on Wednesday that the reorganization cost it $6.7 million in severance and other employee costs. It expects its reorganization will cost the company $11 million to $13 million.

Penegor in a statement Wednesday said the company had a “significant acceleration” in its digital business. Consumers continue to gravitate toward mobile ordering and delivery.

On a global basis, Wendy’s thrived in the quarter. International same-store sales increased 13.9% and are now up 28% on a two-year basis. Wendy’s has refocused on its international development strategy and now operates 1,100 locations outside the U.S. Globally, Wendy’s has 7,100 restaurants. Franchisees operate all but about 400 of those restaurants.  

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