Wendy's serves up expectation beating earnings though shares fall on same-restaurant sales miss

 
Billy Bambrough
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Fast food chain Wendy's has come under pressure from the rise of up-market style eateries (Source: Getty)

US burger chain Wendy's has beaten bottom line earning expectations, though same-restaurant sales rose less than expected.

Shares were down 4.7 per cent in pre-market shortly before the market open.

Net income fell to $26.5m (£20.2m), or 10 cents per share, in the second quarter from $40.2m a year earlier.

Revenue slid 22 per cent to $382.7 million, mostly owing to the ownership of 361 fewer company-operated restaurants in the period. A 33 per cent slide in sales revenue offset an 18 per cent increase in franchise revenue.

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Analysts had expected nine cents a share in earnings on revenue of $368m, according to Thomson Reuters.

The market was disappointed by sales at established restaurants open for at least 15 months coming in under expectations, rising by just 0.4 per cent in North America, compared to the 1.9 per cent rise a Consensus Metrix analyst poll had expected.

The results follow better than expected numbers for its first quarter.

Wendy's is in the midst of an extensive strategic shift that will reduce its company-operated restaurant ownership to around five per cent by the end of 2016.

By the end of the second quarter it had offloaded 55 restaurants, with 315 more set to be franchised this year.

Wendy's latest numbers will be an all too familiar picture for those following incumbent food and drink vendors who are battling for market share with new rivals and more health conscious consumers.

Falling grocery prices and increases to minimum wages have also pushed up the price at many popular chains.

Read more: High street restaurant dishes have more salt than McDonald's

McDonald's, Dunkin Brands, and Starbucks have all posted disappointing same-restaurant sales for the quarter as customers cut back.

Chief executive Todd Penegor blamed "challenging industry conditions" for the poor performance but pointed to the previous 14 consecutive quarters of positive same-restaurant sales as evidence of the health of the brand.

Penegor said:

In the second quarter, we were able to maintain strong performance on the bottom line even as sales came in lower than we anticipated.

While we are not fully satisfied with this outcome, this is a testament to the improved quality of our earnings as a result of transitioning to a predominantly franchised model, with royalties and rental income contributing a higher amount of earnings.

For the year, Wendy's now expects adjusted annual per-share earnings of 39 cents to 40 cents a share, compared with its previous guidance for 38 cents to 40 cents.

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