Wendy’s meal deals, humorous offer fail to boost visits
Wendy’s Co. narrowed its full-year sales outlook after quarterly same-store sales rose less than analysts expected, with value meals and a tongue-in-cheek promotion sparking less interest than anticipated.
Overall sales should increase about 3% this year, the low end of its earlier forecast of as much as 5%, the company said in a statement Thursday. Same-store sales, a metric tracking stores open for at least 15 months, increased 0.2% in the third quarter. Analysts were calling for much faster growth.
Wendy’s has sought to stoke growth by boosting its breakfast and late-night businesses, including with deals and increased advertising, while seeking to recruit more users to its digital app. The company has also launched humorous marketing campaigns, including the McBroken website, which displays where McDonald’s Corp. ice cream machines are down and redirects customers to the nearest Wendy’s.
Customer counts declined in the quarter, Wendy’s said, highlighting that the burger chain needs to do more to entice diners saddled with high inflation. Earnings per share were roughly in line, while revenue surpassed expectations.
Wendy’s said that it expects improved sales trends between the third and fourth quarters. Initiatives driving sales include a $1 beverage promotion and a limited-time offer around SpongeBob’s 25th anniversary, featuring a Krabby Patty burger and Pineapple Under the Sea Frosty.
The SpongeBob promotion is “generating a powerful response that is driving significant sales growth,” Chief Executive Officer Kirk Tanner said in a call with analysts.
Wendy’s shares fell 4.5% at 9:39 a.m. in New York. The company’s shares rose 4.3% this year through Wednesday’s close, compared to a 22% increase for the S&P 500 Index.
Wall Street is looking for “tangible evidence” that the company can improve sales and outpace peers, Jim Salera at Stephens Inc. wrote in a note to clients following the earnings release.
“We believe investors are in a wait-and-see mode,” Salera wrote.