Wendy’s (WEN) has found itself on the wrong side of investor sentiment, with stagnant sales growth, a plummeting stock price, and a steady stream of downward-trending earnings revisions weighing heavily on the outlook. The challenges facing the company are not unique, fast food has become an intensely competitive space, but they are particularly acute for Wendy’s given its reliance on a narrower menu and more limited global footprint.The industry itself is facing headwinds. Consumers are shifting preference ...

Market Analysis by covering: Cracker Barrel Old Country Store, Brinker International Inc, The Wendy's Co, CAVA Group Inc. Read 's Market Analysis on Investing.com ...

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Group 1 - The Wendy's Company (NASDAQ: WEN) has been previously rated as a sell due to weak traffic data and poor growth prospects [1] - The author emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies [1] - The article serves as a performance tracker for investment ideas and aims to connect with like-minded investors [1] Group 2 - There are no disclosed positions in any mentioned companies, and no plans to initiate such positions in the near future [2] - The article reflects the author's personal opinions and is not influenced by compensation from any company [2] - Seeking Alpha does not provide investment recommendations and the views expressed may not represent the platform as a whole [3]

Core Insights - The article highlights the extensive experience of Mehmood, founder and director of Moods Investment Research, with over 20 years in the financial sector, particularly in securities analysis and capital markets investment [1] Group 1: Company Profile - Moods Investment Research is based in Ontario, Canada, and focuses on investment research [1] - Mehmood has previously served as vice president at Mashreqbank in Dubai, UAE, indicating a strong background in banking and finance [1] - The company specializes in analyzing securities and managing a sizable portfolio that includes equities and real estate investments [1] Group 2: Educational Background - Mehmood holds a BA (Hons) degree with a double major in Law & Politics from York University, Toronto, Canada, which adds to his analytical capabilities in the investment field [1]

Core Insights - Fast food chains, particularly Wendy's and McDonald's, are experiencing a decline in their breakfast business as consumers cut back on spending [2][3] - Executives from both companies noted that breakfast is the weakest meal period, with consumers opting to eat at home during times of financial uncertainty [2][3] Company Performance - Wendy's interim CEO indicated that increased consumer uncertainty leads to reduced breakfast purchases, as this meal is often the first to be skipped [2] - McDonald's CEO confirmed that breakfast is the weakest daypart, with some customers not visiting for that meal [2] - McDonald's reported a slowdown in U.S. outlet growth to 2.5% in the spring quarter, attributed to continued pressure on lower-income consumers [3] Consumer Behavior - Despite a cautious consumer mood, U.S. households are showing resilience in spending, particularly in essentials and packaged goods [4] - Back-to-school spending has been a standout category, while travel and luxury spending face challenges [4] - A report indicated that nearly one-third of consumers delayed or canceled discretionary purchases in June due to financial pressures [5] Financial Sentiment - The financial security of consumers significantly impacts their spending behavior, with 31% of financially secure consumers maintaining their purchasing frequency despite price increases, compared to only 13% of paycheck-to-paycheck consumers [6]

PART I: FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents The Wendy's Company's unaudited condensed consolidated financial statements for the quarterly period ended June 29, 2025, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with detailed notes explaining the basis of presentation and key accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2025, total assets decreased to **$4.89 billion** from **$5.03 billion** at year-end 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities remained relatively stable at **$4.78 billion**, and total stockholders' equity decreased significantly from **$259.4 million** to **$112.9 million**, driven by treasury stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,894,148** | **$5,034,843** | | Cash and cash equivalents | $281,226 | $450,512 | | **Total Liabilities** | **$4,781,260** | **$4,775,491** | | Long-term debt | $2,650,907 | $2,662,130 | | **Total Stockholders' Equity** | **$112,888** | **$259,352** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2025, total revenues slightly decreased to **$560.9 million** compared to **$570.7 million** in Q2 2024, yet operating profit increased to **$104.3 million** from **$99.5 million**, and net income was stable at **$55.1 million**, with diluted EPS rising to **$0.29** from **$0.27** year-over-year Q2 and H1 2025 vs 2024 Performance (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $560,929 | $570,727 | $1,084,401 | $1,105,480 | | Operating Profit | $104,260 | $99,507 | $187,386 | $180,663 | | Net Income | $55,110 | $54,643 | $94,342 | $96,636 | | Diluted EPS | $0.29 | $0.27 | $0.48 | $0.47 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 29, 2025, net cash from operating activities was stable at **$146.0 million**, cash used in investing activities increased to **$52.3 million**, and cash used in financing activities significantly increased to **$272.7 million**, primarily due to a large increase in common stock repurchases (**$186.5 million** in 2025 vs. **$34.2 million** in 2024), resulting in a net decrease in cash of **$173.5 million** Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Net cash used in investing activities | ($52,264) | ($43,958) | | Net cash used in financing activities | ($272,687) | ($162,382) | | Net decrease in cash | ($173,506) | ($64,175) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on key financial statement components, outlining the basis of presentation, disaggregating revenue by segment, detailing lease accounting, long-term debt structure, stockholder equity activities including dividends and repurchases, and providing segment-level financial performance - The company's business is managed and reported in three segments: Wendy's U.S., Wendy's International, and Global Real Estate & Development[25](index=25&type=chunk) Total Revenues by Segment - Q2 2025 (in thousands) | Segment | Q2 2025 Revenue | | :--- | :--- | | Wendy's U.S. | $461,142 | | Wendy's International | $38,850 | | Global Real Estate & Development | $60,937 | | **Total** | **$560,929** | - During Q1 and Q2 2025, the company paid dividends of **$0.25** and **$0.14 per share**, respectively[66](index=66&type=chunk) - In the first six months of 2025, the company repurchased **12,957 thousand shares** for an aggregate price of **$186.0 million** under its January 2023 authorization, leaving **$49.0 million** available[67](index=67&type=chunk) [Management's Discussion and Analysis (MD&A)](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of 2025, covering a slight decrease in global systemwide sales and revenues, segment performance, revenue and expense fluctuations, and an overview of liquidity, capital resources, and cash flows [Executive Overview and Key Business Measures](index=28&type=section&id=Executive%20Overview%20and%20Key%20Business%20Measures) As of June 29, 2025, the Wendy's system comprised **7,334 restaurants**, with approximately **5%** being company-operated, and management tracks performance using key metrics such as Same-Restaurant Sales, Company-Operated Restaurant Margin, and Systemwide Sales - As of June 29, 2025, the Wendy's system had **7,334 restaurants**, with **5,967** in the U.S. and **1,367** internationally[119](index=119&type=chunk) - Key business measures used by management include **Same-Restaurant Sales**, **Company-Operated Restaurant Margin**, and **Systemwide Sales**[123](index=123&type=chunk)[124](index=124&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) In Q2 2025, revenues decreased **1.7%** to **$560.9 million**, and global same-restaurant sales fell **2.9%**, driven by a **3.6%** decline in the U.S. despite a **1.8%** increase internationally, primarily due to lower traffic partially offset by a higher average check Same-Restaurant Sales Growth - Q2 2025 vs Q2 2024 | Region/Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | U.S. Systemwide | (3.6)% | 0.6% | | International | 1.8% | 2.5% | | **Global Systemwide** | **(2.9)%** | **0.8%** | - The decrease in sales for company-operated restaurants was primarily due to a decrease in traffic, partially offset by a higher average check[140](index=140&type=chunk) - Cost of sales as a percentage of sales increased in Q2 2025, driven by higher commodity costs and restaurant labor rates, which was partially offset by labor efficiencies and higher average check[146](index=146&type=chunk) [Segment Information](index=37&type=section&id=Segment%20Information) In Q2 2025, Wendy's U.S. segment revenues declined to **$461.1 million** but profit slightly increased to **$137.2 million**, while Wendy's International segment saw revenue growth to **$38.9 million** and profit increase to **$13.2 million**, and Global Real Estate & Development segment's revenue and profit both slightly decreased Segment Profit (Adjusted EBITDA) - Q2 2025 vs Q2 2024 (in millions) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Wendy's U.S. | $137.2 | $136.7 | | Wendy's International | $13.2 | $10.7 | | Global Real Estate & Development | $27.3 | $28.2 | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 29, 2025, the company held **$330.1 million** in cash, cash equivalents, and restricted cash, with management believing current cash and operating cash flows are sufficient for the next 12 months, despite significant cash used in financing activities due to **$186.0 million** in stock repurchases and **$76.2 million** in dividends - The company repurchased **13.0 million shares** for **$186.0 million** in the first six months of 2025[170](index=170&type=chunk) - Dividends paid in the first half of 2025 totaled **$76.2 million**[171](index=171&type=chunk) - The significant increase in cash used in financing activities was primarily due to a **$152.3 million** increase in common stock repurchases compared to the prior year[177](index=177&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports that as of June 29, 2025, there have been no material changes to the market risk information previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 29, 2024 - There were no material changes from the market risk information contained in the Company's Form 10-K for the fiscal year ended December 29, 2024[180](index=180&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Interim CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 29, 2025, with no material changes in internal control over financial reporting during the second quarter of 2025 - Based on evaluations, the Interim CEO and CFO concluded that as of June 29, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[181](index=181&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, its internal control[182](index=182&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation and claims incidental to its business, for which management believes it has established adequate accruals, though an aggregate possible range of loss cannot be estimated due to the preliminary stage of many proceedings - The Company believes it has adequate accruals for all of its legal and environmental matters but cannot estimate the aggregate possible range of loss for existing litigation and claims[186](index=186&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors that were previously disclosed in its Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Company's Form 10-K[187](index=187&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025, with **4.78 million shares** repurchased at an average price of **$12.97 per share**, leaving **$49.0 million** available under the existing plan Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Value Remaining Under Plan | | :--- | :--- | :--- | :--- | | **Total Q2 2025** | **4,777,483** | **$12.97** | **$49,037,650** | - The Board of Directors authorized a **$500.0 million** repurchase program in January 2023, effective through February 28, 2027[192](index=192&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a marketing consulting agreement and certifications from the Interim CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include a Marketing Consulting Agreement, CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and financial data in Inline XBRL format[193](index=193&type=chunk)

Core Insights - Wendy's plans to reduce the number of promotions for the remainder of the year after experiencing challenges with too many initiatives during the summer [1][2] - The company reported earnings per share of $0.29, a 7.4% increase year-on-year, and revenue of $560.9 million, a 1.7% decrease, both exceeding analysts' expectations [3] - Foot traffic to Wendy's locations decreased by 3% compared to the same quarter last year, although this was an improvement from a 4.7% decline in Q1 [8] Promotions and Strategy - The interim CEO highlighted that the summer promotions, while appealing, overwhelmed restaurant teams and confused customers [2] - Future focus will be on chicken innovation and a new beverage lineup, including a collaboration with Netflix for the second season of "Wednesday" [3] Technology and Innovation - Wendy's is expanding its use of voice AI for drive-thru orders, aiming to implement this technology in up to 600 restaurants by the end of 2025 [9] - The company has been testing innovative drive-thru solutions, including food delivery robots in underground tunnels [9] Market Reaction - Following the earnings report, Wendy's shares increased by approximately 1.5% [4]

Financial Data and Key Metrics Changes - Global system-wide sales declined by 1.8% on a constant currency basis, driven by a 3.6% decrease in same restaurant sales in the U.S. [33][16] - Adjusted EBITDA was $146.6 million, an increase of 2.5% year-over-year, while adjusted earnings per share rose by 7.4% to $0.29 [38][18] - Free cash flow generated in the first half of the year was $109.5 million, reflecting strong cash generation capabilities [39] Business Line Data and Key Metrics Changes - The U.S. same restaurant sales declined by 3.6%, partially offset by a higher average check, while same restaurant sales at U.S. company-owned restaurants outperformed the U.S. system by almost 300 basis points, declining only 0.7% [33][34] - The international segment achieved system-wide sales growth of 8.7%, with notable increases in Japan (27%) and Mexico (16%) [35][34] Market Data and Key Metrics Changes - The company anticipates full-year global system-wide sales to decline between 3% to 5% year-over-year, reflecting a challenging competitive environment and dynamic consumer behavior [48][29] - U.S. company-operated restaurant margin is expected to be around 14%, with commodity inflation projected at approximately 4% [49] Company Strategy and Development Direction - The company is focusing on improving execution and performance while maintaining its long-term strategy, emphasizing the importance of franchisee partnerships [5][6] - Key strategic priorities include fresh food innovation, enhancing customer experience, and accelerating net unit growth, with a target of 2% to 3% net new unit growth for the year [30][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the consumer and competitive environment has changed significantly, leading to a revised outlook for the year [4][29] - The company is committed to strengthening its franchisee relationships and improving operational efficiencies to drive better results [14][15] Other Important Information - The company returned over $88 million to shareholders through dividends and share repurchases in the second quarter, totaling over $262 million in the first half of the year [18][43] - The company is on track to return approximately $325 million to shareholders in 2025, an increase of $40 million compared to 2024 [43] Q&A Session Summary Question: Assessment of marketing value menu performance - Management noted that the first half of the year faced challenges due to changing consumer behavior and weather impacts, leading to a reassessment of marketing strategies for the second half [61][60] Question: Franchisee sentiment and alignment on value - Management indicated that franchisee relationships are good but can be improved, emphasizing the need for better communication and prioritization of initiatives [72][74] Question: Revisiting U.S. franchise development - Management confirmed a commitment to improving franchisee economics through new data analytics capabilities and detailed P&L discussions at the restaurant level [86][87] Question: Customer satisfaction and same-store sales growth - Management is actively tracking customer satisfaction and believes improvements will lead to increased frequency of visits, with positive trends already observed [90][91] Question: Core menu pricing strategy - Management acknowledged the need to evaluate core menu pricing and emphasized the importance of quality in conjunction with pricing strategies [96][98] Question: Changes to chicken patty and focus on chicken - Management confirmed the use of high-quality ingredients for chicken products and expressed confidence in the new chicken tenders outperforming competitors in tests [107][108]

Company Performance - Wendy's reported quarterly earnings of $0.29 per share, exceeding the Zacks Consensus Estimate of $0.25 per share, and up from $0.27 per share a year ago, representing an earnings surprise of +16.00% [1] - The company posted revenues of $560.93 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.97%, although this is a decrease from year-ago revenues of $570.73 million [2] - Over the last four quarters, Wendy's has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance and Outlook - Wendy's shares have declined approximately 38.9% since the beginning of the year, contrasting with the S&P 500's gain of 7.8% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.25 on revenues of $557.94 million, and for the current fiscal year, it is $0.93 on revenues of $2.2 billion [7] Industry Context - The Retail - Restaurants industry, to which Wendy's belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Wendy's stock performance [5]