For the second quarter, Wendy's reported an unremarkable 0.7% gain in comps at its company-owned stores, and 0.4% at its franchised locations. In one breath, management cited its menu-management strategy and new products as reasons for its continued momentum. Yet in the next, it stated that its second quarter wasn't as strong as the first, as the company continues to execute a market-based pricing strategy.
To me, this sounds like a contradiction. Management feels customers are reacting positively to its new menu items, yet sales are off because of higher menu prices. Apparently, consumers need a bit of time to adjust to the higher prices.
Wendy's continues to try to keep pace with McDonald's
Despite its ongoing efforts to reinvent itself, I find little to whet my appetite at Wendy's. Management can say what it wants about its comps, but growth of less than 1% doesn't get my mouth watering. When I combine that with its lowered earnings outlook, overstuffed valuation, and warnings from management about how the company's changes will negatively affect short-term results, I don't see a recipe for success at Wendy's.
For more on the new lineup at Wendy's, check out: