Wendy's (NASDAQ:WEN) Misses Q4 Sales Targets
Fast-food chain Wendy’s (NASDAQ:WEN) missed analysts' expectations in Q4 FY2023, with revenue flat year on year at $540.7 million. It made a non-GAAP profit of $0.21 per share, down from its profit of $0.22 per share in the same quarter last year.
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Wendy's (WEN) Q4 FY2023 Highlights:
Revenue: $540.7 million vs analyst estimates of $546.7 million (1.1% miss)
EPS (non-GAAP): $0.21 vs analyst expectations of $0.23 (9.7% miss)
Guidance for 2024 EPS (non-GAAP): $1.00 vs analyst expectations of $1.11 (9.9% miss)
Free Cash Flow of $60.43 million, down 41% from the previous quarter
Gross Margin (GAAP): 34.9%, up from 34.4% in the same quarter last year
Same-Store Sales were up 1.3% year on year
Store Locations: 7,000 at quarter end, decreasing by 95 over the last 12 months
Market Capitalization: $3.98 billion
"The Wendy's® system delivered strong sales, profit, and cash flow growth in 2023, all supported by progress on our strategic growth pillars," President and Chief Executive Officer Kirk Tanner said.
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ:WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Wendy's is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 6.3% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Wendy's revenue grew 0.8% year on year to $540.7 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4.2% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Wendy's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.6% year on year. With positive same-store sales growth amid an increasing number of restaurants, Wendy's is reaching more diners and growing sales.
In the latest quarter, Wendy's same-store sales rose 1.3% year on year. By the company's standards, this growth was a meaningful deceleration from the 6.4% year-on-year increase it posted 12 months ago. We'll be watching Wendy's closely to see if it can reaccelerate growth.
Key Takeaways from Wendy's Q4 Results
Revenue missed Wall Street's estimates due to same-store sales that fell below expectations. Full-year EPS guidance missed analysts' expectations. Overall, this was a mixed quarter for Wendy's. The company is down 1.9% on the results and currently trades at $18.93 per share.
Wendy's may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
