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Wendy's signals sales recovery on breakfast strength after Covid-19 dent

[BENGALURU] Wendy's saw its sales recover in June and July as several US states eased lockdown restrictions, after the fast-food chain's quarterly profit narrowly beat Wall Street expectations, driven by its new breakfast items.

The company said the new menu, which included social media favourite the "Baconator sandwich", had a strong second quarter, at a time when other chains such as McDonald's and Starbucks have said they are facing pressure as people working from home are increasingly cooking their meals.

"Despite breakfast being the hardest hit daypart in QSR (quick service restaurants category) since the beginning of the pandemic, our businesses continue to grow each month," Wendy's chief executive officer Todd Penegor said.

Decline in the US same-store sales in the second quarter was limited to 4.4 per cent by a recovery towards the end of the quarter. In July, sales rose 8.2 per cent, after a 5.1 per cent growth in June.

Truist Securities analyst Jake Bartlett said the current trends give confidence that Wendy's will "continue to thrive despite the Covid-19 crisis and quickly re-accelerate".

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The company also said it would invest US$13 million more in the breakfast category, launched in March in the hopes of gaining customers from McDonald's, in the back half of the year.

Excluding items, Wendy's earned 12 US cents per share in the second quarter ended June 28, scraping past estimates of 11 US cents per share, according to IBES data from Refinitiv.

Shares of the chain, up 7 per cent this year, were down 4 per cent in early trading as limited restaurant operations due to the pandemic dented sales in the quarter.

Revenue fell about 8 per cent to US$402.3 million, missing estimates of US$409.7 million.

Wendy's also said on Wednesday it intended to resume share repurchases in 2020 after suspending it in March to conserve cash amidst declining sales.


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