The Wendy's Co. (WEN - Analyst Report) 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.
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.
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 - Analyst Report) and Yum! Brands Inc. (YUM - Analyst Report). 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.
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