Wendy’s Closes More Locations As Revenue Dips

Fast food company Wendy’s Co. reported second quarter results that were a bit better than expectations as the company’s top line fell less than analysts’ consensus.

According to the company’s announcement Wednesday (Aug. 5), reported by The Wall Street Journal, revenues were down a little more than 3 percent to $489.5 million in the quarter, with impact coming from a lower store count, as there were 141 fewer company-owned outlets from a year ago. Analysts had projected the company would take in $486 million on its top line.

In terms of profit, Wendy’s showed $.08 a share, adjusted for one-offs, on the bottom line, with that tally missing the Street by a penny and down from $.09 a year ago.

At least some of the profit decline can be traced to wage pressures, which have hit margins as minimum wage increases have in turn forced franchisees to boost what they pay employees. In commentary discussing the latest results, Wendy’s management said that minimum wage hikes may influence franchisees to cut staff positions entirely or at least some employee working hours. Wendy’s may not be able to counteract those pressures simply by raising menu prices.

Yet, at least some cost control means that the projection for earnings before interest, taxes, depreciation and amortization — a rough measure of cash flow — is being boosted to a range of $385 million to $390 million from its previous range of $375 million to $385 million. And despite a slowdown in same-store sales, Wendy’s is looking for higher earnings on an adjusted basis as the company continues to sell off stores. The company has stated it is on track to reduce its ownership of stores to 5 percent of the overall tally. Within two years the company will see roughly 80 percent of its earnings come from royalties and rentals paid by franchisees.

There’s also an additional share repurchase in place, with a $165 million repurchase on top of the $850 million previously bought by the company.

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