News of a likely 2013 introduction of the Pretzel Bacon Cheeseburger at Wendy’s provoked one securities analyst to upgrade his outlook for The Wendy’s Co.’s stock, writing that the item could increase same-store sales by as much as 3 percent.

But one other expert cautioned industry observers not to get twisted up in hype, saying the sandwich fits well with Wendy’s positioning as a fresher, higher-quality offering in quick service but was unlikely to fulfill such sales expectations.


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In a May 24 research note, analyst Mark Kalinowski of Janney Capital Markets upgraded The Wendy’s Co.’s stock to “buy,” from “neutral,” based on reports that the Pretzel Bacon Cheeseburger tested earlier this year was one of Wendy’s top-selling limited-time offerings in decades.

In his report, Kalinowski included a picture of promotional material for the Pretzel Bacon Cheeseburger taken by Associated Press writer Candice Choi during a January visit to a Miami location of Wendy’s that tested the product.

“Our industry sources inform us that the Pretzel Bacon Cheeseburger, to be launched nationally at some point during 2013, was one of Wendy’s most successful test products from the last 20 years,” Kalinowski wrote. “As such, we believe the national launch will lead to some meaningful acceleration in Wendy’s same-store sales.”

Kalinowski wrote that Wendy’s would only confirm that the Pretzel Bacon Cheeseburger “will be part of the 2013 promotional calendar,” and he offered the third quarter as an educated guess for a likely launch date. Assuming that period for the sandwich to be advertised and offered, Kalinowski raised same-store sales estimates 3 percent to an increase of more than 5 percent.

But Darren Tristano, executive vice president of Chicago-based Technomic Inc., was more skeptical that one sandwich could bring about that big a bump in comparable sales.

“My immediate reaction would be don’t bet on the bun,” he said. “It’s all about the beef, so I’m not so sure a pretzel bun introduction is going to be as big an impact as would be necessary for someone to make an advised, intelligent decision about buying their stock.”

Leaving aside the prospects for Wendy’s share price — which also reflects costs and benefits of other initiatives like the “Image Activation” remodeling program or the effects of commodity inflation — Tristano said the proposed limited-time offer might sell well but still faces stiff competition in the burger segment to steal market share and drive traffic and sales.

“It’s hard to imagine that a new bun is going to make a huge impact given what Wendy’s, McDonald’s and Burger King all spend on advertising,” he said. “This fits with Wendy’s positioning, but it would take a huge amount of pretzel burgers to affect their stock price significantly.”

Same-store sales in North America inched up only 1 percent at company-owned restaurants and 0.6 percent at franchised locations in the March 31-ended first quarter for Wendy’s. Company officials said they were able to ring up robust sales of premium items like the Grilled Chicken Flatbread limited-time offer, but the more than 6,500-unit chain lost market share of value-conscious customers ordering from value menus at other quick-service brands.

Wendy’s said in its most recent earnings call that it would increase the amount of marketing time it puts toward value platforms like the Right Price Right Size menu, going for consistent, year-round weight behind it to prevent further loss of value-conscious customers. To execute a premium limited-time offering at the same time would require a delicate balancing of the Pretzel Bacon Cheeseburger’s price point against the 99-cent through $1.99 range Wendy’s will be advertising heavily for Right Price Right Size, Tristano said.

“We saw this with Ruby Tuesday when they tried to upscale themselves out of a category known for value pricing,” he said. “Wendy’s has to be cautious to not become something it isn’t in the eyes of consumers. It comes down to how they want to price themselves.”

Dublin, Ohio-based Wendy’s operates or franchises locations in the United States and 27 foreign markets.

Contact Mark Brandau at mark.brandau@penton.com.
Follow him on Twitter: @Mark_from_NRN