Wendy’s deals might be “biggie.” But it’s performance this year hasn’t been.
On an earnings call that felt more like a public reckoning, executives for The Wendy’s Co. shared that the Dublin, Ohio-based chain was “clearly not earning at [its] potential.”
In the first half of the year, Wendy’s faced slowing sales, lower restaurant traffic, and a slew of store closures.
The company announced it will cut its dividend in half—from 14 cents a share to 7 cents—as it attempts to stabilize profit through a struggling turnaround.
Q2 insights: Sales dipped and stores closed
Despite a net income of $32.6 million, Wendy’s saw sales drop by 6.5% in the second quarter, with U.S. same-store sales down 7% and international same-store sales down 2.3%.
U.S. restaurants saw a 12.5% decrease in traffic this quarter, which Wendy’s CFO Steve Cirulis attributed to limiting discounts and reducing or cutting breakfast operation hours.
“Our traffic, our value proposition, and franchise economics are not meeting our expectations,” Wendy’s CEO Bob Wright said in a statement.
The company withdrew its financial outlook for the remainder of the year, a move that typically occurs when sudden changes make estimates unreliable.
What went wrong?
Wendy’s executives outlined five areas the company will sharpen to improve its returns as the year continues, including:
- food quality
- operational excellence
- digital experience
- market expansion
But the biggest concern was Wendy’s poor marketing. As one of the most recognizable brands in the country, Wright says the company’s messaging needed to establish a more meaningful connection with customers.
Wendy’s current marketing isn’t leading customers to the store. Its promotional collaborations—like the recent Minions & Monsters collabs—aren’t increasing traffic as expected, either.
“We’ve been over-reliant on a calendar of one-off promotions and collaborations rather than a consistent, relevant brand narrative grounded in our equity and what Wendy’s stands for,” Wright said.
A few times on the call, Wright repeated the need for Wendy’s to reassert a consistent brand-building story for customers, underscoring its importance to the company’s turnaround effort.
Looking forward
The earnings are the latest development in Wendy’s ongoing slump: Last year, the company’s revenue fell 3.1% to $2.18 billion.
As Fast Company reported in May, Wendy’s has been closing hundreds of restaurants in the United States as it reevaluates its store footprint. Wright says it was a targeted decision to strengthen the portfolio’s health and help the franchisees “get to the right place.”
But Wright is confident that the fast-food burger chain can—and will—recover. The CEO plans to streamline the drive-through process and rebuild the chain’s value menu to deliver on its cost-saving promises. He also wants to enable more targeted in-app marketing.
As the company moves forward, its shareholder-targeted priorities will center on financial discipline, thoughtful investing, and improving performance across both digital and in-store fronts.
“We’re in the early stages of this work, and meaningful change won’t happen overnight,” Wright said. “What you should expect from us is transparent communication and measurable progress that builds over time.”
Despite lagging sales and a halved dividend, shares of The Wendy’s Co. (Nasdaq: WEN) were up roughly 3.5% today as of this writing. However, the stock is down more than 6% year to date and more than 22% over the last 12 months.