Wendy's (WEN +5.83%) is hoping a strategic move into China will reignite the brand that has struggled mightily in the U.S. in recent years. The Dublin, Ohio-based burger chain announced its first-quarter results on May 8, and the numbers were not good.
NASDAQ: WEN
Key Data Points
Global sales fell 5.5% in the first quarter, largely driven by weak U.S. restaurant performance, which was down 7.8%. This is an acceleration of the brand's weakening sales performance compared to the same period last year.
Wendy's has closed more than 200 locations in the U.S. in the past year. However bad it may be at home, Wendy's recently signed a new agreement with China to open up to 1,000 restaurants over the next decade. This is a bold move for the company, but it isn't unheard of, as competitors such as McDonald's and Starbucks already have established footprints in China.
Image source: Getty Images.
This is all part of an internal initiative called "Project Fresh," which will also focus on menu upgrades such as a spicy chicken sandwich.
The move to China should give Wendy's investors some hope. International sales have been a bright spot for the chain. Frankly, the company needed to make a bold move to right the ship, and this is the most promising pivot available.
Wendy's investors will still need to remain patient since this is a multiyear effort, but with the stock priced so low right now -- if you're bullish on more American burgers in China -- it could be a good time to buy and hold for a while. Wendy's stock is down more than 31% over the past 12 months and more than 63% over the past five years. Its trailing P/E ratio is only about 9.5. There's a long road ahead, but the future of Wendy's hinges on its success outside of the U.S.
