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Wendy's sees growth from higher-income consumers, no 'major resistance' to prices

The restaurant chain also hinted at plans to bring in more customers for breakfast.

Wendy's (WEN) is gaining higher-income consumers even while inflation continues to plague the restaurant business.

"The good news is we're seeing nice growth with the over $75,000 cohort, and we continue to hold nice share there," CEO Todd Allan Penegor said on a call with investors after Q1 2023 earnings were announced on Wednesday. The under-$75,000 consumers? The company, he said, has "maintained our share, but traffic is relatively flattish there."

In Q1 U.S. same-store sales increased by 7.2% boosted by "continued" higher prices and year-over-year customer count growth in each month of the quarter. The food chain increased prices for the year by about 7%, higher than about 6% in the previous quarter.

CFO Gunther Plosch said the brand isn't really seeing pushback to the higher prices, saying the "proof is in the pudding." He added: "Remember, pricing, the carryover is about 5%...so, the new pricing action is not a lot and again, I think the proof is in the pudding here. We have not seen major resistance from customers on the pricing actions we have taken, as evidenced by the traffic growth that we have seen in the first quarter and maintaining and holding our dollar and traffic share in the category."

Meanwhile, Wendy's is eyeing breakfast as an opportunity to bring in sales growth, particularly with its Frosty Cold Brews, value offerings, and other deals to lure in customers.

Penegor said, "As I look at the calendar for the rest of the year, where we are on value, what we're doing on Frosty cold brews, what we're doing on some innovation...I'm feeling really confident that we're going to continue to compete well."

Competitor Taco Bell (YUM) recently doubled down on its breakfast category and saw a boost in sales in part thanks to comedian Pete Davidson.

BLOOMSBURG, UNITED STATES - 2022/08/18: A sign advertising breakfast items seen at a Wendy's fast food restaurant near Bloomsburg. (Photo by Paul Weaver/SOPA Images/LightRocket via Getty Images)
A sign advertising breakfast items seen at a Wendy's fast food restaurant near Bloomsburg. (Photo by Paul Weaver/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

In the first quarter, Wendy's beat estimates on both the top and bottom lines. Revenue came in at $528.8 million, higher than estimates of $522.9 million. Adjusted earnings per share, also slightly higher, $0.21, compared to estimates of $0.20. Year-to-date shares are up 0.8%, but up nearly 28% compared to last year.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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