Wendy’s(WEN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Global system-wide sales increased by 5.4% in Q4, reaching $3.7 billion, driven by same-restaurant sales growth of 4.1% in the U.S. and 4.9% internationally [38][39] - Adjusted EBITDA increased by 8.6% to$ 137.5 million, with adjusted earnings per share rising to $0.25, a$ 0.04 increase over the prior year [41][42] - Full year 2024 total system-wide sales reached $14.5 billion, reflecting over 3% growth compared to the prior year [14] Business Line Data and Key Metrics Changes - U.S. same-restaurant sales growth was 1.4%, while international same-restaurant sales grew by 2.8% [14] - Breakfast sales grew over 6%, outpacing the QSR burger category, driven by increased awareness and impactful innovation [15][28] - Digital sales grew nearly 40% year-over-year, with loyalty member growth up 25% [11][17] Market Data and Key Metrics Changes - The U.S. business maintained or grew dollar and traffic share in the QSR burger category in every quarter [14] - Internationally, system-wide sales grew by 11% on a constant currency basis, led by strong net unit growth [10] - The morning daypart contributed to U.S. growth with sales up over 4% compared to the prior year [10] Company Strategy and Development Direction - The company aims to drive sales and EBITDA growth through three strategic initiatives: Fresh Famous Food, delivering an exceptional customer experience, and accelerating global unit development [25] - Plans to expand in fast-growing categories, including chicken and beverages, while maintaining a focus on value through the Biggie Bag platform [26][27] - The company is committed to increasing operational intensity and enhancing customer experience through technology investments, including digital menu boards and AI voice-enabled ordering [31][32] Management's Comments on Operating Environment and Future Outlook - Management expects Q1 2025 to be the low point for same-restaurant sales, with improvements anticipated as the year progresses [65][66] - The company acknowledges industry traffic headwinds but remains optimistic about regaining momentum through innovative programming and marketing efforts [113][114] - The updated capital allocation policy aims to maximize long-term shareholder value while increasing investments in growth initiatives [45][48] Other Important Information - The company opened 113 new restaurants in Q4 and closed underperforming locations, which is expected to be a headwind to sales growth in 2025 [12][19] - The company plans to increase share repurchases to up to$ 200 million in 2025, demonstrating confidence in growth plans [48][49] - The company has established a target net leverage ratio of 3.5x to 5x adjusted EBITDA [48] Q&A Session Summary Question: What are the embedded comp expectations for the year? - Management expects positive same-restaurant sales growth for 2025, despite a projected decline in Q1 due to industry traffic headwinds [65][66] Question: Can you elaborate on the unit development outlook? - Management has high confidence in the 2% to 3% net unit growth guidance, with agreements in place for new builds [69][70] Question: What are the big bucket opportunities to drive comps? - Management is focusing on core menu innovation, value propositions, and operational intensity to enhance customer experience [76][78] Question: Why choose share repurchase over reinvestment? - The capital allocation policy allows for both attractive dividends and accelerated growth plans, taking advantage of favorable stock prices [82] Question: What are the early learnings from the voice of the drive-thru pilot? - The pilot has shown improvements in speed of service and sales, with plans to expand to more locations [121][122] Question: How do you expect the breakfast daypart to trend in 2025? - Breakfast is expected to grow faster than the rest of the business, with ongoing investments in awareness and innovation [90][138]