Lower Q2 Guidance Trumps Wendy’s Profit, Revenue Beats

When Wendy’s Co. (NASDAQ: WEN) reported first-quarter results Wednesday morning, shares rose in the pre-market session because the company beat consensus estimates on both profit and revenues. The upbeat tone didn’t last long, though. At the bell, shares opened down about 3.3%.

Clearing a low hurdle did not make up for the fact that sales and profits were down year over year. In the case of revenues, way down: 16.2%. Much of that was blamed on the closure of some 375 company-operated stores over the course of the prior 12 months.

Same-store sales rose 3.6% in the first quarter but, the company warned, could drop below 3% in the second quarter. That was the number that trumped all the others, including an increase in full-year earnings per share guidance from a prior range of $0.35 to $0.37 to a new range of $0.38 to $0.40.

Wendy’s also plans to sell an additional 315 stores to franchisees this year and open 110 new stores.
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The company repurchased 4.9 million shares at a cost of $48.2 million in the first quarter and touted the success of its “4 for $4” value-priced meal. But investors could only see that lowered same-store sales guidance for the second quarter.

Wendy’s stock traded down about 7% in the noon hour on Wednesday, at $10.39 in a 52-week range of $8.43 to $11.71. The stock closed at $11.18 on Tuesday, and the consensus price target before the earnings report was $11.69.