Wendy’s jumps 6% despite a weaker than expected earnings report on Wednesday

In its announcement on Wednesday, Wendy’s (NASDAQ: WEN) said that its sales in the United States are slowly starting to recover from the COVID-19 driven hit to its business in the past months. The company saw a sharp decline in comparable-store sales in March and half of April. In the last week, however, its same-store sales were reported only 2.1% down.

Following the announcement, Wendy’s was reported 6% up in premarket trading on Wednesday.

Wendy’s Q1 financial results versus analysts’ estimates

Wendy’s also released weaker than expected financial results for the first quarter on Wednesday. The company said that it generated £327 million in revenue in Q1 and made 7.2 pence of adjusted earnings per share. In comparison, analysts had anticipated Wendy’s to print £335 million in revenue while their estimate for earnings per share (EPS) was capped at a marginally higher 8 pence in the recent quarter.

At £11.66 million, Wendy’s net income came in significantly lower than £25.76 million that it posted in the same quarter last year. Its net sales were down 1% on an annualized basis in Q1.

Wendy’s saw an increase in its same-store sales in the U.S at the start of the year. Following a 7.7% decline in March, however, its comparable-store sales came in flat in the recent quarter. In the week that ended on 5^th April, the burger chain reported the steepest hit to its same-store sales that slumped 25.8%.

The fast-food chain said that its recently launched breakfast made up 8% of its total sales in April. Originally, the company had planned on spending £56.50 million to £64.50 million to promote its new breakfast menu in 2020 that it launched in early March. As Coronavirus restricted people to their homes for breakfasts, the company slashed this expenditure to maintain its financial stature amidst the pandemic.

Wendy’s online orders accounted for 5.5% of total sales in Q1

Wendy’s digital orders made up 5.5% of the company’s total sales in Q1. Despite recovering sales in the U.S, Wendy’s supply chain is still under threat due to the outbreak. As per a Stephens study, the beef stock has run out at around 18% of the company’s restaurants in the U.S.  

On the international front, Wendy’s said its same-store sales declined by 23.6% in the past week versus a 39.1% decline in the week that ended on 12^th April.

Wendy’s slashed its quarterly dividend from 9.7 pence per share to 4 pence per share on Wednesday in a bid to shore up finances. It also said that it will cut its capital, general, and administrative expenses by £24.23 million this year. At the start of the current week, Wendy’s had £294.81 million in cash.