Fast-food chain Wendy’s (NASDAQ: WEN) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 2.1% year on year to $523.5 million. Its non-GAAP profit of $0.20 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Wendy’s leadership attributed its first quarter results to a combination of challenging consumer conditions, adverse winter weather, and the impact of new promotional efforts. CEO Kirk Tanner highlighted that while global same-store sales fell, the company maintained U.S. traffic and dollar share, driven by product innovation such as the Thin Mint Frosty and ongoing emphasis on value. He pointed to international growth, notably in Canada and new markets like Australia, as a bright spot in the quarter’s performance.

Looking ahead, management lowered its full-year adjusted EPS guidance, citing ongoing uncertainty in consumer demand and broader industry traffic softness. Tanner emphasized that Wendy’s is prioritizing operational improvements, increased digital engagement, and menu innovation to offset these pressures. He explained, “We are focused on controlling what we can control and adapting to the current environment through both value and innovation,” while reiterating the company’s commitment to net unit growth and expanded international presence.

Key Insights from Management’s Remarks

Wendy’s first quarter was influenced by macroeconomic pressures and strategic programming, with management focusing on menu innovation and operational improvements to drive future growth and maintain competitiveness.

• Menu Innovation and Collaborations: The launch of new Frosty flavors and collaborations with brands such as Girl Scouts and Takis helped boost customer traffic temporarily, with further product tie-ins planned for summer and fall.
• Operational Excellence Initiatives: The company rolled out new training programs, doubled in-restaurant field visits, and introduced operational tools like menu item labels and delivery scales to improve order accuracy and customer satisfaction.
• Technology Investments: Management accelerated the deployment of digital menu boards and AI-based order-taking, aiming to enhance personalization and drive higher digital sales, which reached over 20% of total sales for the first time.
• International Expansion: Over 60% of new restaurant openings occurred in international markets, with record growth in Canada and early success in Australia, reinforcing Wendy’s strategy to expand its global footprint.
• Franchisee Support and Benchmarking: A new system for collecting and benchmarking franchisee financials at the restaurant level was introduced, intended to drive operational best practices and improve franchisee profitability.

Drivers of Future Performance

Management expects continued consumer uncertainty to impact sales, but believes menu innovation, technology investments, and international expansion will support gradual improvement through the year.

• Customer Value and Promotions: The 100 Days of Summer campaign and ongoing value offerings are designed to attract price-sensitive consumers and drive frequency, especially as industry-wide QSR traffic remains pressured.
• Digital and Operational Enhancements: Expansion of digital ordering, loyalty features, and AI-driven tools is expected to improve efficiency and customer engagement, contributing to higher average order values and productivity.
• International Growth Focus: The pipeline of new international units and development agreements in markets such as Mexico, Chile, and Australia is central to Wendy’s long-term growth strategy, providing diversification from U.S. market headwinds.

Top Analyst Questions

• Jeffrey Bernstein (Barclays): Pressed on whether Wendy’s value platform needs to be refreshed in light of consumer pressure; CEO Kirk Tanner stressed a balanced approach with ongoing innovation and weekly value deals.
• David Palmer (Evercore ISI): Asked where the biggest improvements in customer experience are expected; Tanner cited investments in order accuracy and hospitality through operational tools and field resources.
• Dennis Geiger (UBS): Inquired about franchisee demand and the development pipeline; Tanner expressed confidence in both international and domestic growth, emphasizing ongoing pipeline visibility beyond 2025.
• Jon Tower (Citi): Sought details on Q1’s sales softness and income cohort trends; management noted broad-based pressure, especially among households earning below $75,000, while reaffirming investment in growth initiatives.
• Sara Senatore (Bank of America): Questioned the impact of reduced advertising spend; CFO Ken Cook said share was maintained and emphasized a focus on in-restaurant experience to drive frequency.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the effectiveness of Wendy’s 100 Days of Summer campaign in driving guest traffic and frequency, (2) execution of international expansion and new unit openings, and (3) progress in digital engagement and operational improvements such as AI order-taking and accuracy tools. We will also track developments in the competitive landscape and consumer spending patterns, which could influence near-term performance.

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