Wendy’s withdraws financial guidance for 2020 as same-store sales decrease by 20%

Wendy’s withdraws financial guidance for 2020 as same-store sales decrease by 20%

  • Wendy’s withdraws financial guidance for 2020 as same-store sales decrease by 20%.
  • Drive-thru orders account for 90% of Wendy's total sales in the week ending in March 22nd.
  • Wendy's cuts advertising to save costs amidst the ongoing health emergency.
  • Wendy's defers base rent payments for franchisees that rent property from it by 50%.
  • Wendy's suspends share buyback & completely draws down its revolving financing facility.

Wendy’s (NASDAQ:WEN) said on Thursday that Coronavirus fueled a 20% decline in its same-store sales. The American international fast food restaurant also highlighted measures directed at supporting its franchisees and improving liquidity at large.

Wendy’s also withdrew its forecast for the current year while it refrained from giving its long-term financial guidance for 2021 to 2024 as well. In its previous guidance, Wendy’s had expected £9.90 billion to £10.3 billion in sales in 2020. In terms of earnings, it had forecast 49 to 51 pence per share.

Wendy’s had also estimated its global system-wide sales to grow at 4-5% annually between 2021 and 2024.

Wendy’s Drive-Thru Orders Account For 90% Of Total Sales

In the week that ended on 22nd March, Wendy’s same-store sales were 20% down. Digital orders made up 4.3% of the companies’ total sales while drive-thru orders accounted for 90% of it. Wendy’s digital sales were capped at 2.5% in 2019.

The fast-food chain introduced a new breakfast on its menu across the country on March 2nd. Breakfast sales in that week were reported 15% higher. Wendy’s estimates that its breakfast menu will eventually account for 10% of the company’s total sales per day.

In light of the sharp demand for its breakfast menu, Wendy’s said that that it plans on cutting advertisements to save costs in 2020 amidst the ongoing Coronavirus pandemic. Originally, it was supposed to spend £57.66 million to £65.90 million on marketing its newly launched breakfast.

In support of its franchisees, Wendy’s said it will extend royalties and marketing funds payments by 45 days in the upcoming 3 months. During this time, it will defer the base rent payments for franchisees that rent property from the company by 50%. Franchisees, as per Wendy’s, will also get an additional year to meet the new requirements of restaurant development and for renovation of their existing restaurants.

Wendy’s Suspends Its Share Buyback Program

Further measures from Wendy’s included suspension of the share buyback program. After fully withdrawing funds from its revolving financing facility, Wendy’s said it now has around £280 million in cash.

To minimize the fast transmission of COVID-19, Wendy’s has ordered a temporary shut down at 189 international locations and 46 of its U.S restaurants.

In the morning session, Wendy’s was seen trading 3% up on Thursday. At £11.80 per share, the stock has lost around 33% in the stock market in 2020 so far. Wendy’s currently has a market cap of £2.64 billion.

By Wajeeh Hasan Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

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