In a press release dated May 6th The Wendy’s Company (WEN) announced results for the first quarter ending March 29th. The Company disappointed with top and bottom line below estimates.
The following table summarizes the results for the period compared with the values for the corresponding quarter of the previous fiscal year (Values expressed as US$ x 1,000 except EPS)
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First Quarter Ending
|
March 29th 2020
|
March 30th 2019
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Difference (%)
|
|
Sales:
|
$404,960
|
$408,583
|
-0.9
|
|
Gross profit, Company locations:
|
$16,799
|
$25,118
|
-33.1
|
|
Operating income:
|
$48,732
|
$66,266
|
-26.5
|
|
Pre-tax Income
Net Income
|
$21,283
$14,441
|
$39,884
$31,894
|
-46.6
-54.7
|
|
Diluted earnings per share:
|
$0.06
|
$0.14
|
-57.1
|
|
Gross Margin Company locations (%)
|
10.1
|
14.9
|
-32.2
|
|
Operating Margin (%)
|
12.0
|
16.2
|
-25.9
|
|
Profit Margin (%)
|
3.6
|
7.9
|
-54.4
|
|
Long-term Debt:
|
$3,613,974
|
$3,636,145
|
-0.6
|
|
12 Months Trailing:
|
|
|
|
|
Return on Assets (%)
|
3.7
|
|
|
|
Return on Equity (%)
|
23.5
|
|
|
|
Operating Margin (%)
|
20.0
|
|
|
|
Profit Margin (%)
|
10.0
|
|
|
|
Total Assets 1
|
$4,981,716
|
$4,994,529
|
-0.3
|
|
Market Capitalization
|
$4,498,000
|
|
|
- Includes approximately $2.0 billion in goodwill and intangibles.
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52-Week Range in Share Price: $6.82 to $ 24.04 50-day Moving average $15.84
Market Close May 5th. pre-release $18.83 Close May 6th $20.19
Forward P/E 36.2 Beta 1.2
Wendy’s operates 5,865 restaurants in the U.S. 99 percent of which are functional. The Company has 943 international restaurants with over half functional.
For the first quarter of 2020 same-store sales growth attained 1.0 percent. The 3.7 percent gain in January and February was offset by declined of 25% for earl to mid-March.
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Todd Penegor CEO Wendy's |
In commenting on first quarter performance Todd Penegor president and CEO stated “we have taken steps to help protect our team members and customers during these uncertain times, including utilizing no-contact and limited-contact ordering options and focusing on social distancing practices at our restaurants. We have invested in training across our system to ensure employee and customer safety in areas such as hand washing and hygiene re-certifications, social distancing, and proper mask utilization. We also instituted an Emergency Paid Sick Leave policy for our Company hourly employees to provide additional support for employees affected by COVID-19 and have implemented Restaurant Recognition Pay in which hourly crew members, shift managers, and assistant General Managers in Company restaurants receive a 10% increase in hourly pay. We recently announced that we are extending both programs through the end of May.
We have worked diligently with our franchisees to ensure that they are set up in the best position possible to navigate through this disruption, both operationally and financially. On the operational front, we have worked to ensure that our teams are receiving the supplies they need, made changes to evolve and simplify our menu, and updated staffing and procedures to continue to run great restaurants through the drive-thru and with delivery during this time. Financially, we have worked to help franchisees preserve cash flow with royalty, advertising, and rent payment deferrals, we have extended our new build and reimaging requirements by a year and we have worked directly with our largest franchise lenders on behalf of our system to move to interest only loans for a period of time.
At the corporate level, we have taken several steps to ensure financial flexibility during this unprecedented time. We have fully drawn our Variable Funding Senior Secured Notes revolving financing facility, suspended all share repurchase activity, reduced our second quarter dividend, and identified approximately $30 million of savings in 2020 within capital expenditures and non- people related general & administrative expenses. As a result of these efforts, our cash balance remains strong at approximately $365 million as of May 3, 2020.