The Wendy's Company (WEN Quick QuoteWEN - Free Report) is benefiting from solid comps growth and strength in U.S. breakfast sales and digital sales momentum. This and the emphasis on cost management and strategic pricing bode well. However, high commodity and labor costs are headwinds.

Growth Drivers of WEN

The company continues to impress investors with robust global same-restaurant sales growth. During the fourth quarter of fiscal 2024, same-restaurant sales at international restaurants (excluding Argentina) rose 4.9% year over year compared with 4.3% a year ago. Comps at global restaurants increased 4.3% year over year compared with 1.3% in the prior-year quarter. The metric in the United States registered 4.1% year-over-year growth compared with 0.9% in the year-ago quarter.

Furthermore, emphasis on introducing innovative offerings and providing compelling value propositions to enhance customer satisfaction and sustain restaurant margins is expected to drive performance throughout 2025.

Wendy’s continues to focus on Breakfast daypart Offerings to drive incremental sales. It believes there is significant growth potential in the breakfast business without the need for additional labor, thus improving the restaurants' economic model. In 2024, Wendy’s breakfast sales grew more than 6% year over year, outperforming the QSR burger category, driven by increased brand awareness and product innovation. The company expanded its menu beyond breakfast with new offerings like Saucy Nuggs and seasonal Frosty flavors, enhancing customer engagement throughout the year.

Breakfast remains a key growth driver and will continue to receive a larger share of advertising spending relative to its sales contribution. Looking ahead to 2025, Wendy’s plans to sustain breakfast momentum through product innovation, strategic partnerships and targeted promotions to attract new customers. Additionally, the company is reallocating breakfast advertising funds toward field operations to enhance the customer experience across all dayparts and improve restaurant efficiency.

Coming to net unit growth, the company expanded its system footprint by opening 276 new restaurants globally in fiscal 2024. It closed underperforming units to strengthen its footprint. Although closures present a near-term sales headwind, new locations in stronger trade areas are expected to deliver double the AUVs of the closed restaurants. The company remains confident in achieving net unit growth of 2% to 3% in 2025, supported by ongoing new builds and franchisee commitments to expand the restaurant network.

For 2025, WEN anticipates opening between 150 and 200 new units, with approximately two-thirds of these located in international markets. Within that segment, around one-third is expected to come from Canada and Europe, while about half will be in APMEA. 

Factors Hurting WEN

Wendy's, which shares space with Shake Shack Inc. (SHAK Quick QuoteSHAK - Free Report) , The Cheesecake Factory Incorporated (CAKE Quick QuoteCAKE - Free Report) and Arcos Dorados Holdings Inc. (ARCO Quick QuoteARCO - Free Report) , has been witnessing increased expenses for quite some time. During the fourth quarter of fiscal 2024, general and administrative expenses were up 2.3% year over year to $67.2 million from $65.7 million. The upside was caused by an increase in incentive compensation and a rise in employee compensation and benefits, which was partially offset by lower professional fees.

Also, inflationary pressures on commodities and labor added to the downside. The company is still seeing inflationary pressures on beef. While the company intends to strategically adjust select menu prices and product offerings to mitigate the challenges, potential delays in implementation and competitive pressures may hinder its ability to offset cost increases fully. For fiscal 2025, the company projects commodity inflation of about 1% and wage inflation of approximately 4%. Our model predicts total costs and expenses in 2025 to rise 1% year over year to $1.9 billion.