Wendy's Cuts Forecast Ahead of Breakfast Launch, Sending Stock Lower
Wendy’s stock has fallen sharply after the fast food chain revealed plans to launch breakfast across the U.S., slashing its 2019 forecast as a result.
Wendy’s stock has fallen sharply after the fast-food chain revealed plans to launch breakfast across the U.S., slashing its 2019 forecast as a result.
Wendy’s stock has fallen sharply in early trading after the fast food chain revealed plans to launch breakfast across the U.S., slashing its 2019 forecast as a result.
The company said it would pump $20 million into expanding breakfast in 2020, leading it to cut expectations for this year.
The back story.
The company has attempted to establish a company-wide breakfast menu several times but has been unsuccessful due to intense competition, costs and margin pressures.
Around 300 Wendy’s restaurants still serve breakfast following its previous efforts.
Fast food burger chains have experienced a slowdown recently and have turned to new ways of attracting customers at all times of the day.
Wendy’s has delivered better-than-expected bottom-line results in the past two quarters despite increasing competition - and its stock is up 41% for the year.
The fast food restaurant chain slashed its 2019 forecast as it announced plans to invest $20 million to prepare for the launch of its breakfast menu across the U.S next year.
The offering will include the Breakfast Baconator sandwich and the Honey Butter Chicken Biscuit.
It also plans to hire 20,000 new employees to support the breakfast expansion.
Wendy’s had forecast an adjusted earnings per share growth range of between 3.5% and 7% for the year, but changed this to a decline of between 3.5% and 6.5% in a trading update on Tuesday.
Adjusted Ebitda is now expected to be between a range of flat and a decline of 2%, on last year’s $415.4 million - against the previous forecast of 2.5% to 4.5% growth.
The company also removed its 2020 goals in order to provide an update at its investor day next month.
Wendy’s stock fell 9.3% in early trading.
A successful breakfast expansion would add top line growth, boost the brand and allow Wendy’s to expand opening hours.
However, fast food breakfast is a risk - even the likes of McDonald’s have discovered breakfast demand can be slow.
Guggenheim analysts downgraded Wendy’s from buy to neutral, warning that the breakfast launch added risk and created uncertainty.
Given the $20 million investment, breakfast really will be the most important meal of the day for Wendy’s.