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May 8, 2020, 9:05 a.m. EDT

Wendy’s says some items may not be availabile due to beef supply disruptions, analysts find many menus are chicken-only

Wendy’s is scheduled to report first-quarter earnings on Wednesday

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By Tonya Garcia, MarketWatch

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The breakfast launch drove a 16% rise in global same-store sales for that week, according to Todd Penegor, Wendy’s chief executive, speaking on the earnings call. The launch was on March 2.

“While the environment we encountered as we started breakfast was not what anyone would have expected, the strength of our program makes this daypart a key bright spot for us,” Penegor said, according to a FactSet transcript. “It has performed well despite significant headwinds, which reinforces how excited customers are about having a great new breakfast option.”

Penegor said the company has shifted its marketing attention to chicken due to the shortages in beef.

SunTrust Robinson Humphrey notes same-store sales improvement over recent weeks, with a decline in the U.S. of 2.1% for the week ending May 3, which analysts note is an outperformance of McDonald’s Corp. /zigman2/quotes/203508018/composite MCD +1.97%   and Restaurant Brands International Inc.’s /zigman2/quotes/202094900/composite QSR -4.40%   Burger King chain. Analysts estimate that breakfast accounts for 5% to 10% of sales

SunTrust rates Wendy’s stock buy with a $23 price target, up from $20.

“While we were initially skeptical of the breakfast launch, we admit that management was able to successfully navigate a challenging sales environment, spending a nominal amount on advertising and still achieving a high-single-digit mix on that daypart,” wrote BTIG analysts.

“Looking ahead, we expect the current beef shortage to last for a few more weeks and have a nominal impact on sales performance.”

BTIG rates Wendy’s stock neutral.

RBC Capital Markets analysts think there’s more than just breakfast working in Wendy’s favor.

“Lift from breakfast, digital/delivery and promotions appears to have helped drive the sustained improvement, as have stimulus payments,” analysts wrote. “Speed of service improvements were also cited as a factor in driving recent momentum, with stricter operating procedures related to COVID-19 actually helping to drive higher restaurant efficiency.”

RBC rates Wendy’s stock sector perform and raised its price target to $21 from $15.

Wendy’s shares have climbed 6.7% over the last year. The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.64%   is nearly breakeven for the past 12 months.

/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 203.18
+3.92 +1.97%
Volume: 3.16M
Aug. 6, 2020 4:00p
P/E Ratio
32.22
Dividend Yield
2.46%
Market Cap
$148.16 billion
Rev. per Employee
$100,120
loading...
/zigman2/quotes/202094900/composite
US : U.S.: NYSE
$ 55.20
-2.54 -4.40%
Volume: 3.22M
Aug. 6, 2020 4:00p
P/E Ratio
23.83
Dividend Yield
3.77%
Market Cap
$26.83 billion
Rev. per Employee
$892,833
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,349.16
+21.39 +0.64%
Volume: 2.41B
Aug. 6, 2020 5:08p
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Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies. You can follow her on Twitter @tgarcianyc. She is based in New York.

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