Update: Wendy's Flexes Legal Muscles At Franchisees
- Wendy’s is suing DavCo.
- The Image Activation Program calls on restaurant owners to invest their cash in remodeling stores.
- By flexing its legal muscles, Wendy’s is teaching other franchisees to stay in line.
- The unintended consequence of the hostile actions may be that potential franchisee operators decide to avoid the Wendy’s brand.
- I correctly predicted problems with the Image Activation Program. I did not predict a lawsuit, and this is worse than the worst case scenarios I would have imagined.
McDonald's Or Wendy's: Who Won The 3rd Quarter Burger War?
- McDonald's released Q3 earnings on October 21.
- Wendy's released Q3 earnings on November 6.
- Both companies fell short of analysts' expectations.
- Which company had the better quarter?
Update: The Wendy's Company Q3 2014 Earnings
- Revenue of $512.49 million misses estimates by $3.78 million and is down 20% year over year.
- Company-owned comp sales were up by 2% while franchise comps were down by 0.5%.
- Q3 adjusted EPS of $.08 missed analyst estimates by $.01. GAAP EPS was $.06.
- Restaurant operating margins for company-operated restaurants in North America were down, which I did not expect.
- The stock has traded relatively flat on the news.
Wendy's Misses Q3 Earnings Expectations, Reaffirms EPS Outlook, Raises Dividend By 10%
- Q3 earnings were released before the market opened on November 6.
- Earnings per share and revenue came up short of expectations.
- Comparable-store sales increased 2% at company-owned restaurants.
- Announced a 10% increase to its quarterly dividend.
- The company's stock has reacted by making a slight move to the upside.
- Fast food has been suffering in the wake of changing consumer preferences.
- WEN financials will not unilaterally cause surge in company ticker.
- The company will continue to be viable as long as leadership manages to adapt to changing market conditions.
The Wendy's Company Has A Good Strategy For Growth In The Face Of Higher Minimum Wages
- Wendy’s is using international growth to drive value for shareholders.
- Strength in restaurant margins may enhance the ability of the company to attract franchise operators.
- The growth strategy is focused on areas with higher minimum wage laws than the United States. The strategy defies conventional thinking about minimum wages in the QSR industry.
5 Important Factors To Watch For In Wendy's Q3 ReleaseJoey Solitro • Oct. 29, 2014
- The company met earnings per share expectations and surpassed revenue expectations in its Q2 report on August 7.
- Q3 earnings will be announced on November 6.
- The stock has fallen more than 8% year-to-date.
- The stock currently has a dividend yield of about 2.5%.
- Wendy’s comparable-store sales growth rate has been increasing despite severe competition in the market.
- The transition to a franchise-based model should reduce overhead costs for the company. It will also enhance the liquidity position, allowing the company to return more cash to investors.
- Higher beef prices have led to a higher demand for pork products. The new pork menu should benefit from this trend.
- The company is currently undervalued by 15%.
Does The Wendy's Whisper Number Indicate Investor Confidence?
- The whisper number is $0.09, one cent behind the analysts' estimate.
- Wendy's has a 60% positive surprise history (having topped the whisper in 12 of the 20 earnings reports for which we have data).
- The overall average post earnings price move is 'positive' (beat the whisper number and see strength, miss and see strength) when the company reports earnings.
- Turnaround was robust over the past year, but growth trajectory has slowed.
- Wendy's is suffering from shifting consumer preferences, just as its competitors are.
- Growth potential limited in a saturated U.S. market without plans for international expansion.
Rite Aid And Wendy's Are Facing A Similar Situation
- Rite Aid and Wendy's shares find themselves in a similar position.
- Rite Aid and Wendy's have both rallied out of the recession.
- These true turnarounds have offered returns of 476% (RAD) and 80% (WEN) in the last two years.
- A recent setback in share price may be indicative of an opportune buying time for potential investors.
Why Wendy's Is A Better Buy Than Its Fast Food Counterparts
- Wendy's Pretzel Bacon Cheeseburger is a monster hit driving customer acquisition and repeat business.
- Strong sales and net income growth beating competitors like McDonald's and Burger King.
- Company seeing great success from "Image Activation" in-store renovations and will benefit as more restaurants get redone.
Wendy's Remodeling Program Is A Worthwhile Investment
- Wendy's plans to remodel half of its 600 company-owned stores by the end of 2015.
- Wendy's stock is down over 10% from its high, creating a desirable entry-point.
- Wendy's recently announced a $275 million stock buyback plan.
Jul. 29, 2014, 8:16 AM
- NPD Group's long-range forecast for restaurant traffic calls for less than 1% growth annually.
- Breakfast traffic is expected to grow faster than lunch and dinner traffic.
- "Margins are being squeezed, and it’s a battle for share," warns the research firm.
- Restaurants stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN.
Jul. 18, 2014, 7:23 AM
Jul. 1, 2014, 12:06 PM
- Restaurant operators in California are expected to increase prices to counterbalance an increase in the minimum wage in the state which takes effect today,
- The minimum hourly wage goes to $9 from $8 as an incremental step in a plan to take it to $10 per hour by 2016.
- Fast-food stocks: MCD, BKW, WEN, JACK, YUM, SONC, PLKI
Jun. 30, 2014, 7:07 AM
- A jump in beef prices has restaurant operators scrambling to avoid taking a hit on margins this year.
- While Chipotle has been able to pass on higher input costs to consumers, most chains are seeing consumer push back on price hikes.
- A new twist" Fast-food chains Carl's Jr. and Hardee's have introduced smaller-sized sandwiches to its menu to try to keep profits intact.
- Related stocks: CAKE, CBRL, CMG, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN.
- Previous: Beef prices could pressure restaurant margins
Jun. 19, 2014, 7:49 AM
- Wendy's (WEN) plans to add the Pretzel Bacon Cheeseburger and Pretzel Pub Chicken to its menu next month.
- Last year, the restaurant operator created a stir in the QSR business when the pretzel burger introduction added several points to comp sales growth on its wide popularity.
- There's some buzz over the pretzel burgers becoming a permanent menu item.
- Wendy's plans to let customers upgrade any burger to a pretzel bun for an extra $0.30.
Jun. 17, 2014, 11:50 AM
- Beef prices keep moving higher as a drought in Texas diminishes what's already a tight supply of cattle in the U.S.
- Though beef demand in the U.S. is peaking with the summer grilling season starting, the impact on margins for sellers from higher wholesale prices could be felt later this year when consumers push back against absorbing the extra costs.
- What to watch: Chipotle (CMG) passed on its menu price increases to consumers with relative ease, but other chains (MCD, BKW, WEN, TXRH, BLMN, RUTH) are expected to feel pressure on their bottom lines from higher beef prices.
Jun. 17, 2014, 7:52 AM
- Count IMF Managing Director Christine Lagarde as another proponent of raising the federal minimum wage in the U.S.
- Lagarde points to the 50M working Americans living below the poverty level in making her claim that "we" have to do something about it.
- Legislation on a minimum wage increase has been stalled in Congress, but is likely to be teed up as mid-term election issue.
- Related stocks: MCD, BKW, SONC, DENN, WMT, JACK, GTIM, WEN, TAST, PLKI, PZZA, YUM, NATH, CKEC, AMC, RGC.
- Bloomberg Lagarde interview
Jun. 12, 2014, 1:48 PM
- Burger chain Krystal is coming back from the dead with impressive gains in unit-level profitability.
- The turnaround by the privately-owned company has been strong enough that it plans to expand rapidly into new states.
- What to watch: A fast-growing Krystal could give established burger chains (MCD, WEN, BKW, SONC) something to think about with its ability to drive traffic in regions where it will be a novelty.
Jun. 3, 2014, 8:58 AM
- The city council in Seattle approves an increase in the minimum wage to $15 per hour.
- Mayor Ed Murray is expected to sign the measure into law today.
- The pay floor will be implemented over several years with the specific time-frame depending upon the size of a business.
- Fast-food restaurant chains (MCD, BKW, WEN, JACK, YUM, SONC, PLKI) are expected to feel the biggest pinch from higher minimum wage levels.
Jun. 2, 2014, 11:34 AM
- Improved traffic at restaurants chains in April helped boost the Restaurant Performance Index monitored by the National Restaurant Association by 0.3% to 101.7.
- The Expectations Index, which measures the six-month outlook for operators, improved 0.2% to 102.2 to mark the highest level for the index in two years.
- Restaurant stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN
May. 15, 2014, 6:48 PM
May. 15, 2014, 7:51 AM
- Fast-food workers are planning to walk off the job at chains across the country today in an organized move to protest low wages.
- The push for a higher minimum wage has gained traction in several states and major cities, although President Obama's proposed $10.10 per hour rate doesn't have the support in Congress yet for a federal minimum wage hike.
- Related stocks: MCD, BKW, JACK, WEN, SONC, DENN, PLKI, DPZ.
May. 8, 2014, 2:23 PM
- Wendy's (WEN -1.1%) reports company-owned same-restaurant sales registered a 1.3% gain in Q1. Franchised outlets saw a 0.6% comp gain.
- The company struck a note of caution with its restaurant margin guidance. Wendy's expects restaurant margin in a range of 16.3% to 16.8%. The mark is lower prior guidance of 16.8% to 17.0% due to impact of higher foods which will be tough to pass on in the form of pricing.
May. 8, 2014, 7:03 AM
May. 6, 2014, 1:34 PM
- Restaurant chains saw sales increase at a slightly higher rate last year than sales at independent chains and concepts, according to data from GE Capital.
- The 100 largest chains saw sales grow at a rate of 3.5% vs. the industry average of 3.1%.
- Consumers spent more money per restaurant visit in 2013, but industry-wide same-store sales fell off 0.1% with traffic numbers down.
- For the 6th year in a row, sales at quick-service restaurants rose faster than sales at full-service establishments.
- Restaurant stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN.
Apr. 30, 2014, 1:34 PM
- Republicans in the Senate have blocked a bill that would increase the federal minimum wage to $10.10 per hour incrementally over 30 months.
- The development sets up minimum wage reform as a major topic during November elections.
- Consumer companies have mixed opinions on the topic. Though some larger employers could feel a pinch from a higher level of minimum wages (MCD, SWY, KR, WEN) - some analysts think retailers (WMT, DG, FDO, DLTR, TGT) selling to lower income brackets could get a boost. There's also some speculation that more mom-and-pop shops will be forced out of business if the minimum wage goes to over $10 per hour.
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