The Wendy's Co.
(
WEN
) recently announced its preliminary same-store sales (comps)
results for the second quarter of 2012. The company is scheduled to
report its second-quarter results on August 10, 2012.
Wendy's expects company-operated same-store sales at North
America to rise 3%, representing the fifth consecutive quarter of
positive same-store sales at company-operated outlets. The
projected growth is in line with the company's targeted range of 2%
to 3% same-store sales rise for full fiscal 2012.
Wendy's recently improved its existing core products such as
premium salads, French fries and sandwiches ensuring value
proposition. The rollout of Dave's Hot 'n Juicy Cheeseburgers in
many markets, introduction of Spicy Guacamole Chicken Club sandwich
and premium Signature dishes as part of the brand repositioning
program helped drive the quarterly comps. New marketing messages
further aided the company's second-quarter comps. Management also
expects its new advertising campaign to be well accepted
abroad.
Outlook
For 2012, management continues to believe that the Wendy's chain
will generate adjusted EBITDA in the range of $320-$335 million.
Beyond 2012, annual Adjusted EBITDA growth is expected to be in
high-single digit to low double digit.
Our Take
Wendy's repositioning efforts seem to be paying off. In addition
to reimaging restaurants and upgrading menus, the company is taking
resort to other initiatives. Notable among these are the expansion
of the breakfast line-up to a new market, rollout of high-quality
coffee offering, and promotion of limited-time offers.
On the downside, Wendy's faces stiff competition from industry
biggies like
McDonald's Corporation
(
MCD
) and
Yum! Brands Inc.
(
YUM
). Further, increased beef costs will be a drag on its cost
structure.
However, the preliminary announcement of same-store sales did
not change the Zacks Consensus Estimate for second-quarter 2012
earnings per share that remained unchanged at 4 cents, representing
an 11.76% year-over-year decline. This implies that Wendy's comps
performance will come in line with the analysts' estimate.
Wendy's currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. We maintain our long-term Neutral
recommendation on the stock.
MCDONALDS CORP (MCD): Free Stock Analysis
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WENDYS CO/THE (WEN): Free Stock Analysis Report
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