Wendy's (NASDAQ:WEN) Reports Sales Below Analyst Estimates In Q1 Earnings
Fast-food chain Wendy’s (NASDAQ:WEN) fell short of analysts' expectations in Q1 CY2024, with revenue up 1.1% year on year to $534.8 million. It made a non-GAAP profit of $0.23 per share, improving from its profit of $0.21 per share in the same quarter last year.
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Wendy's (WEN) Q1 CY2024 Highlights:
- Revenue: $534.8 million vs analyst estimates of $540.5 million (1.1% miss)
- EPS (non-GAAP): $0.23 vs analyst estimates of $0.21 (8.1% beat)
- Gross Margin (GAAP): 35.3%, in line with the same quarter last year
- Free Cash Flow of $82.63 million, up 77.5% from the previous quarter
- Same-Store Sales were up 0.9% year on year
- Market Capitalization: $4.03 billion
"The momentum we built across our business in the first quarter puts us on track to achieve our 2024 outlook and on the path toward unlocking the full potential of the powerful Wendy's brand," President and Chief Executive Officer Kirk Tanner said.
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ:WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Wendy's is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 6.2% over the last five years was mediocre , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Wendy's revenue grew 1.1% year on year to $534.8 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4.4% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.
Wendy's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.4% year on year. With positive same-store sales growth amid an increasing number of restaurants, Wendy's is reaching more diners and growing sales.
In the latest quarter, Wendy's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 8% year-on-year increase it posted 12 months ago. We'll be watching Wendy's closely to see if it can reaccelerate growth.
Key Takeaways from Wendy's Q1 Results
We were impressed by how significantly Wendy's blew past analysts' gross margin expectations this quarter. We were also happy its EPS narrowly outperformed Wall Street's estimates. On the other hand, its revenue missed as its same-store sales growth came up short.
Looking ahead, Wendy's full-year EPS guidance was in line with estimates while its adjusted EBITDA and free cash flow came in slightly higher thanks to better-than-expected digital sales, which boost margins. Wendy's also said its breakfast menu items are seeing success, a key part of its strategy.
Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is flat after reporting and currently trades at $19.8 per share.
So should you invest in Wendy's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
