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Wendy's Sales Improve as Beef Supply Normalizes Through May

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The Wendy's Company WEN) has provided an update on operations, May sales and beef supply.

Same-Restaurant Sales

Same-restaurant sales for May were down 3.3% year over year. Of the total same-restaurant sales, the United States registered 1.9% fall and International sales declined 15.7%. As of May 31, same-restaurant sales decreased 9.9%, including 8.6% fall in the country and a 22.4% decline at international outlets.

The company noted that global same-restaurant sales improved every week throughout May. In fact, it improved in low-single digits during the last week. Breakfast in the country was approximately 8% of U.S. systemwide sales.
In May, U.S. digital sales were approximately 4.5% of U.S. systemwide sales. At May-end, the company operated 99% of total U.S. restaurants and carried out 81% of its operations internationally. Notably, restaurants closed within the United States were mainly due to their locations like malls. Restaurants in other countries were closed due to government mandates.

Its operational stores are mainly providing drive-thru and delivery-only services. It expects to re-open system restaurants and dining rooms in accordance with federal, state and local guidance through a phased approach to maintain customer and team member safety.

Updates on Beef Supply

Owing to the country-wide disruptions from coronavirus, mostly to the supply chain, Wendy's experienced shortage of beef in early May due to production challenges faced by suppliers across North America. The company tried to allocate beef supply to all Wendy's system restaurants, with deliveries occurring two or three times a week. Also, it shifted marketing efforts to focus more on chicken products than beef in an effort to alleviate pressure on beef demand.

Encouragingly, beef supply has returned to near-normal levels across the Wendy's system.

Share Price Performance

Wendy's shares have outperformed the Zacks Retail - Restaurants industry in the past three months. Estimates for fiscal 2020 have moved 2% upward in the past 30 days.

The solid price performance and upbeat analysts’ views are primarily backed by strategic initiatives like menu innovation, technological upgrades, international expansion and re-imaging of units. Also, the company’s transition to a franchised business model bodes well. Although the impact of coronavirus is still ailing the overall restaurant industry, the gradual re-opening of operations will benefit the industry players.

Zacks Rank

Wendy's — which shares space with Cracker Barrel Old Country Store, Inc. CBRL, Domino's Pizza, Inc. DPZ and Papa John's International, Inc. PZZA in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Dominos Pizza Inc (DPZ) : Free Stock Analysis Report
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