Fast-food chain Wendy’s (NASDAQ: WEN) reported Q3 CY2025 results topping the market’s revenue expectations, but sales fell by 3% year on year to $549.5 million. Its non-GAAP profit of $0.24 per share was 22.9% above analysts’ consensus estimates.

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StockStory’s Take

Wendy’s third-quarter results reflected persistent sales challenges in its U.S. business, even as overall performance topped Wall Street’s revenue and profit expectations. Management pointed to continued pressure on U.S. same-restaurant sales, driven by lower guest traffic and heightened competition. Interim CEO Ken Cook emphasized the launch of Project Fresh, a comprehensive turnaround plan, as the company’s response to these issues, stating, “We are acting with urgency to return U.S. comp sales to growth.” International operations remained a bright spot, delivering robust system-wide sales growth and new market openings.

Looking forward, Wendy’s expects its turnaround efforts to gradually strengthen U.S. sales and margins, with Project Fresh targeting operational improvements, brand revitalization, and system optimization. Management maintained its full-year guidance, highlighting a strategic pivot towards boosting average unit volumes rather than rapid U.S. expansion. Cook noted that the company is “prioritizing AUV growth in the U.S. and net unit development internationally,” and CFO Suzanne Thuerk added, “These efforts are designed to drive sustainable, profitable growth across the system.” The company’s focus on digital initiatives, streamlined operations, and partnership with franchisees are expected to shape results over the coming quarters.

Key Insights from Management’s Remarks

Management attributed the quarter’s financial outcomes to U.S. traffic declines, successful international expansion, and the launch of new menu items as part of its turnaround strategy.

• U.S. guest traffic decline: Declining customer visits weighed on U.S. same-store sales, partially offset by higher average checks. Management identified heightened industry competition and value pressures as key factors, with company-operated stores outperforming the system due to operational improvements and enhanced training.

• International expansion momentum: Wendy’s international business delivered strong system-wide sales growth and continued to open new restaurants in regions such as Canada, Mexico, and Australia. Management highlighted successful market entries, including its first restaurant in Ireland and strong openings in Australia.

• Project Fresh launched: The company initiated Project Fresh, a multi-pillar turnaround plan in the U.S. focused on brand revitalization, operational excellence, system optimization, and improved capital allocation. Early actions include a comprehensive customer study and investments in digital menu boards and AI-driven ordering.

• Menu innovation and simplification: Wendy’s simplified its programming to focus on core initiatives, including the national launch of chicken tenders (“Tendys”) and new beverage offerings. The chicken tenders launch exceeded internal expectations, with some stores selling out prior to national advertising.

• System optimization and closures: Management is reviewing underperforming U.S. restaurants, with a mid-single-digit percentage of units (estimated around 300) expected to close. This move aims to boost franchisee profitability and reinvest in stronger-performing locations, with closures set to begin in the fourth quarter of this year and continue into 2026.

Drivers of Future Performance

Wendy’s upcoming performance will hinge on the execution of its U.S. turnaround plan, international growth, and the impact of cost pressures on margins.

• Operational improvements in U.S. system: Management is rolling out best practices from company-operated restaurants—where enhanced training and technology have improved customer satisfaction and traffic—to the broader franchise network. These initiatives are expected to support higher average unit volumes and franchisee profitability, with most benefits expected in 2026.

• International development as growth engine: Expansion outside the U.S. remains a top priority, with over 9% net unit growth projected internationally. Management is investing in supply chain and marketing capabilities in markets like Mexico and Canada to sustain momentum and diversify revenue sources.

• Margin headwinds and cost management: Rising beef and labor costs are expected to pressure restaurant margins, especially in the U.S. Management is focused on balancing menu pricing, optimizing operating hours, and leveraging technology—such as digital menu boards—to cushion the impact of inflation and improve productivity.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the rollout and scaling of Project Fresh’s operational initiatives across the U.S. franchise system, (2) progress on international unit development and market entries, and (3) management’s ability to mitigate cost inflation’s impact on margins. The success of new menu items and the closure of underperforming stores will also be closely watched as indicators of turnaround progress.

Wendy's currently trades at $8.98, up from $8.82 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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