Burger restaurant brand executives cite stress on consumers with annual incomes of less than $75,000
The Wendy’s Co.’s, challenged for traffic in the first half of the third quarter, found new menu items helped it achieve positive customer counts in the latter part of period ended Oct. 1, executives said Thursday.
The Dublin, Ohio-based burger brand, which released earnings Thursday, for the third quarter, said same-store sales in the quarter were up 2.8% globally, with increases of 2.2% in the United States and 7.8% internationally.
“Category traffic was challenged throughout the quarter, and this impacted our early results,” said Todd Penegor, Wendy’s CEO and president, on an earnings call. “But following the mid-August launch of several successful innovations and promotions, we deviated from the category trend and achieved positive customer counts in the latter half of the quarter. This led to an acceleration in one and two-year same-restaurant sales growth each month of Q3.”
Wendy’s in August introduced Frosty Cream Cold Brew, a Loaded Nacho Cheeseburger and English-muffin-based breakfast sandwiches.
Penegor said customers did seem impacted by the economy.
“If you look at the consumer, it’s really the tale of two sides,” he said. “The over $75,000 [annual income] consumer continues to be healthy. We continue to see traffic growth in that segment. We’re holding our share in that segment. Under $75,000 consumers [are] a little more stressed. Especially as you go down the income core, it gets even more stressed. But again, we’ve lost a little bit of traffic there, but still holding our share with that consumer.
“From a trade-down perspective, we are seeing some trade down from midscale casual and sit-down into QSR [quick-service restaurants],” Penegor said. “But we’re also seeing some trade out of the category from the lower-income consumer out of QSR and into food-at-home. So it was kind of a wash.”
Penegor said the barbell menu approach is helpful to brand. “We do feel like we've got a calendar that's very balanced with high and low to support both income cohorts,” he said. “Our job is to continue to make sure that we create great experiences as we have those folks trade into our brand and have compelling offers to make sure as folks get a little healthier from an economic standpoint they continue to come back into the Wendy's brand with our great promotions moving forward.”
Investments in digital ordering and loyalty were paying off, executives said.
“Our digital business accelerated in the third quarter with global digital sales mix reaching 13% and total digital sales growing 30% year-over-year as our loyalty program continued to gain momentum,” Penegor said. Global digital sales are expected to be $1.8 billion this year.
Customer acquisition to the digital channels remained a focus in the quarter, he said.
“We did make a nice 5% increase in our total loyalty members, hitting 35 million, so we're proud of that but, more importantly, [the brand saw a] 40% increase in the monthly active users,” he said. “We've got folks to get into the app with some compelling values [such as the] penny JBC [junior bacon cheeseburger] on National Cheeseburger Day clearly drove folks in. And we want to get folks into the app because what we do see is more frequency and higher checks over time for those consumers.”
In the third quarter, Wendy’s opened 72 new restaurants. “We are tracking toward our 2023 global net unit growth target of approximately 2% with 100% of our current year pipeline open or under construction,” Penegor said. “Looking toward the future, we made meaningful progress toward further solidifying our long-term development pipeline by securing incremental commitments with new and existing franchisees across every region in which we operate — with international markets leading the way.”
For the third quarter ended Oct. 1, Wendy’s net income was $58 million, or 28 cents a share, up from $50.5 million, or 24 cents a share, in the same period last year. Revenues were up in the quarter to $550.6 million from $532.6 million in the prior-year period.
Wendy's, founded in 1969, has more than 7,000 restaurants worldwide.
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