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Wendy's Earnings Fall Amid Traffic Headwinds; Fast-Food Chain Withdraws Outlook

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Wendy's Earnings Fall Amid Traffic Headwinds; Fast-Food Chain Withdraws Outlook

Wendy's (WEN) second-quarter earnings fell year over year amid weak traffic trends, while the fast-food chain withdrew its full-year outlook as a new leadership team pursues a turnaround plan.

Wendy's adjusted EPS fell to $0.18 for the quarter ended Jun 28 from $0.29 a year earlier, but topped the FactSet-polled consensus of $0.16. Revenue increased 1.7% to $570.6 million, compared with the Street's estimate of $557.1 million.

Global same-restaurant sales declined 6.3% year over year on a constant currency basis, compared with analysts' estimate that called for a 4.7% drop. The metric tumbled 7% in the US and was down 2.3% internationally. Systemwide sales fell 6.5% in the quarter, driven by weakness in the US.

"Our second-quarter performance fell short of prior expectations and reinforced the need for a thorough revision of the path forward," Chief Financial Officer Steve Cirulis said during the earnings call, according to a FactSet transcript. "Traffic in July was consistent with second quarter trends, and as a result, we expect continued traffic headwinds to impact our ability to return to year-over-year systemwide sales growth in either the third or fourth quarter."

The company withdrew its full-year outlook and announced a dividend cut as its new management team formulates a turnaround plan. RBC Capital Markets anticipated an earnings guidance reduction and a dividend cut.

Wendy's appointed Bob Wright as chief executive in May, while Cirulis joined in June.

"We are not performing at our potential," Wright said on the call. "Traffic is down. Our value proposition has slipped and franchisee economics are under pressure. That said, I've seen this brand at its best and I know we can fix these issues."

Wendy's stock was up 1.3% in Friday trade, but has lost 10% so far this year.

Trian Fund Management was seeking investor backing for a potential take-private bid for Wendy's, the Financial Times reported in May.

Earlier in the week, Burger King parent Restaurant Brands International (QSR) reported better-than-expected second-quarter earnings, while McDonald's (MCD) posted mixed results.

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