Editor's Note: A previous version of this story has been updated to include additional information regarding Wendy's earnings projections and corrected information regarding Wendy's earnings for the July 3-ended second quarter.
The Wendy’s Co. reaffirmed its 2011 earnings growth outlook even as profit margins fell in the second quarter, mostly on higher commodity costs and some incremental advertising spending.
Chief executive Roland Smith said margins would remain pressured for the balance of the year, but momentum for sales, traffic and average check would help the quick-service chain achieve its earnings growth target for this year and grow that metric between 10 percent and 15 percent annually starting in 2012.
Wendy’s is projecting earnings before interest, taxes, depreciation and amortization to be between $330 million and $340 million for fiscal 2011. Based on its growth goal of 10 percent to 15 percent EBITDA growth for 2012, the brand is targeting EBITDA of approximately $368 million to $385 million next year.
For the July 3-ended second quarter, Wendy’s earned $11.3 million, or 3 cents per share, compared with $10.7 million, or 3 cents per share, in the same year-ago quarter. The company’s income from continuing operations, which excludes former sister chain Arby’s results, totaled $11.4 million, compared with $5.4 million a year ago.
Same-store sales increased 2.3 percent at both company-owned and franchised locations in North America, Wendy’s said. Those increases included a 0.9-percent uptick in traffic and a 1.4-percent lift in the average check.
Same-store sales increases in July slowed to 1.7 percent, though Smith noted that transactions were still positive.
“We weren’t advertising a center-of-the-plate item,” he said. “There’s no reason to expect same-store sales are in jeopardy [in the third quarter].”
Smith added that the slight increase in both traffic and average check validated Wendy’s decision to be judicious with price increases this year.
Wendy’s has some room for further pricing action this year, he said, “but we won’t trade one quarter [of higher margins] for the benefit of the trend we’re seeing, which is consumers participating in our brand more often.”
