Wendy’s jumps as chain sees same-store sales rebound

Yahoo Finance’s Heidi Chung joins Zack Guzman to discuss Wendy’s boost in same-store sales in its latest quarterly earnings report amid the coronavirus pandemic.

Video Transcript

ZACK GUZMAN: Just a day after we were talking about Wendy's potential supply issues at their restaurants, the company reported earnings, and we are seeing the stock up more than 5 and 1/2% right now. So maybe, potentially, Wendy's figuring all their stuff out.

Want to get to Heidi Chung for the latest on Wendy's. Heidi.

HEIDI CHUNG: Hey, Zach. Yeah, we're seeing Wendy's stock soaring today, and that's not because the company had a necessarily good first quarter, but it's what management laid out about the future for the company that was really encouraging for investors and analysts alike.

In the first quarter, obviously a big hit from the COVID-19 outbreak. Revenue declining 9/10 of 1% to $405 million. Adjusted EPS falling 36% year over year to $0.09 per share. Domestic same-store sales flat during the quarter, and global same-store sales down 2/10 of 1%.

And at the peak of the COVID outbreak here in the US, same-store sales plunged 25.8% in the week ending April 5. But since then, we've seen same-store sales incrementally get better here. In the week ending May 3, same-store sales declined only 2.1%, so it is improving.

In addition to the sales improving, though, digital and breakfasts were bright spots during the quarter. Wendy's saying that it saw strong growth in the US digital business, doubling, and representing about 5 and 1/2% of total sales. And that compares to 2 and 1/2% of sales in 2019.

The burger chain added two new delivery partners in the first quarter to meet that surging demand through digital. Wendy's mobile-app downloads and users were up 25% since the pandemic as well.

Zack, you and I both tried the Wendy's breakfast items when it launched in early March, and it proved to do really well for the company just ahead of this outbreak, but even during the outbreak it proved to do well as well. It accounted for 8% of sales in April. Management saying that breakfast was also profitable for the company, so some encouraging news on that front.

As of May 3, 25% of international Macy's stores remain closed, but 99% percent of the system here in the US is operational. And in an attempt to preserve cash, Wendy's slashed its dividend to $0.05 from $0.12. The company said that it had about $365 million of cash on hand.

But, of course, a lot of questions on the call regarding the meat supply, the beef-supply issues that have been reported over the past couple of weeks. CEO Todd Penegor addressing that on the conference call, saying that it's true that beef suppliers are facing a lot of production challenges at this moment, and some of their menu items might be missing and in short supply from time to time at specific stores, but he doesn't necessarily see it as a long-term issue. Wendy's, though, shifted its marketing focus to just focus on chicken for the time being to sort of alleviate that pressure on its beef supply.

ZACK GUZMAN: Yeah, got to be safe. You can't be marketing things that you're not sure you're going to have or things that might be getting a little bit more expensive. It is interesting to see, though, the story that we highlighted earlier this week, that Tyson's Waterloo, Iowa, facility is moving forward with plans to reopen there. So we'll keep our eyes on the other meat-supply issues we've been covering. Heidi Chung, thank you so much for bringing us the update there on the Wendy's front. Of course--