Wendy’s Co. experienced a decrease in its stock on Thursday as the fast-food burger chain reported fourth-quarter profit that didn’t meet Wall Street expectations.
The unsatisfactory outcomes were linked to elevated costs associated with cloud computing, and the company’s 2024 outlook didn’t match forecasts.
In reaction, Wendy’s detailed strategic investments aimed at enhancing growth, including $55 million allocated for breakfast advertising, $15 million to bolster digital growth through mobile-app improvements, and an extra $30 million set aside for the introduction of digital menu boards.
The company stressed its “always-on approach” for breakfast ads across diverse media channels, stating a commitment to promoting widespread trial of Wendy’s breakfast offerings.
According to Kirk Tanner, speaking during an analyst call, breakfast is deemed “one of the most compelling levers” for boosting sales and enhancing margins, as expansion can occur without a substantial rise in staffing.
Tanner voiced assurance that the planned investments and growth endeavors would result in a 50% surge in breakfast sales per restaurant over the subsequent two years.
Despite these efforts, Wendy’s stock (WEN) saw a 3.5% decline in morning trading, positioning it at a three-month low after the disappointing earnings report release.
The company disclosed a net income of $46.9 million, or 23 cents per share, compared to $41.3 million, or 19 cents per share, in the same period a year ago.
Adjusted earnings per share fell to 21 cents from 22 cents, failing to meet the FactSet consensus of 23 cents.
Revenue increased by 0.8% to $540.65 million, driven by higher advertising funds revenue and a rise in royalty revenue, though it fell short of the FactSet consensus of $546.8 million.
Wendy’s surpassed expectations in same-restaurant sales, with a 3.2% increase for restaurants open at least a year. U.S. growth of 2.3% exceeded forecasts for a 1.8% rise.
During the quarter, the company allocated $45.7 million towards share buybacks, repurchasing 2.4 million shares.
However, Wendy’s highlighted that as of February 15 in the current year, it hadn’t repurchased any shares, despite being authorized to repurchase up to $310 million worth of its shares.
For 2024, Wendy’s offered a cautious outlook, projecting adjusted earnings per share between 98 cents to $1.02, which falls below the FactSet consensus of $1.11.
Nonetheless, the company foresees a rise in free cash flow to $280 million to $290 million, up from $274.3 million in 2023, surpassing expectations of $275.2 million.
Over the last three months, Wendy’s stock has dropped by 2.1%, whereas the S&P 500 has gained 11.2%.
