Posted Aug 5, 2015 at 12:01 AM
Updated Aug 6, 2015 at 5:15 AM
Wendy’s is taking a look at the bottom of its menu to drive
higher returns. The Dublin-based burger chain beat analyst
estimates of second-quarter revenue, and net income rose
year-over-year. However, its same-store sales, which rose 2.2
percent, lag those of competitors.
Wendy’s is taking a look at the bottom of its menu to drive higher returns.
The Dublin-based burger chain beat analyst estimates of second-quarter revenue, and
net income rose year-over-year. However, its same-store sales, which rose 2.2 percent,
lag those of competitors.
The company believes it lost opportunities to juice its sales in the quarter because of
weakness in its value menu, CEO Emil Brolick said. He told analysts during a
conference call on Wednesday that the chain’s “Right Price, Right Size” value offerings
are not good enough.
Analysts asked about the changes and how they would add to the bottom line. Michael
Gallo of CL King & Associates wanted to know how Brolick plans to make Wendy’s
value menu relevant again.
“We are clearly seeing a shift” away from individual low-priced items to meals, Brolick
said. ” The consumer today is looking for more relevant bundling.”
Presto. Wendy’s is now testing value bundles in the $4 to $6 range, and Brolick said he
hopes to see better results from the value menu by the end of the year.
John Gordon, principal of Pacific Management Consulting Group and a food-service
consultant and analyst, thinks tweaking the value menu is more window dressing than
profit driver.
Wendy’s reported better profit margins for its restaurants and increased its annual
outlook for restaurant margins as well.
The fatter margins are thanks to easing beef and pork prices but also strong limited time
offerings, which carry premium prices.
“You know why the margins are better, right?” Gordon said. “The higher-priced items.”
Gordon thinks Wendy’s needs a better story for how it will improve its same-store
sales figures. Burger King reported a 7 percent jump in U.S. same-store sales in the
second quarter.
Wendy’s booked $489.5 million in revenue in the quarter, down from $506 million a year earlier. That’s largely because the company owned 141 fewer restaurants this year. Net income rose to $40.2 million from $29 million, thanks to the proceeds from the sale of Wendy’s bakery in Zanesville.
The company also is progressing toward the sale of 560 stores, which should net $400 million to $475 million, said Todd Penegor, Wendy’s chief financial officer.
Wall Street shrugged at the company’s results. Wendy’s stock fell 18 cents, or 1.75 percent, to close at $10.11 on Wednesday.