USA: Wendy’s surprise same-restaurant sales drop burn shares

 

Wendy’s Co (WEN.O) on Tuesday reported quarterly sales at established outlets in North America below analyst estimates and lowered its same-store sales forecast for the year, as the burger chain struggles to lure customers in a fiercely competitive U.S. fast-food industry.

Wendy’s, much like its peers, has had to offer cheaper items with added promotions to get people to buy more products.

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But its efforts are not bearing fruit, as the company reduced its same-store sales growth forecast for 2018 to about 1 percent from a previous range of 2-2.5 percent.

The company’s shares fell 5.8 percent to $16.05 in after-market trading. They have gained 4 percent this year.

Wendy’s has launched a slew of promotions including “4 for $4”, discounted Baconator Fries and a 50-cent Frosty dessert that compete with bundled meals offered by McDonald’s $1, $2, $3 menu and Taco Bell’s dollar menu.

Customers have a large range of cheap fast-food options from many chains and keeping sales robust is becoming challenging for many big outlets.

Wendy’s same-restaurant sales in North America fell 0.2 percent in the quarter. Analysts on average had expected same-store sales to rise 1.84 percent, according to IBES data by Refinitiv.

Net income rose to $391.2 million, or $1.60 per share, in the third quarter, from $13.7 million, or 5 cents per share, a year earlier.

Excluding certain items, the company earned 17 cents per share, beating analysts’ average estimate of 15 cents per share.

Revenue rose 2.4 percent to $400.6 million, missing expectations of $405.36 million.

Franchisee royalty and franchisee rental revenue, which contribute to about 38 percent of the company’s net sales, rose 3 percent to $153.7 million in the third quarter.


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