Why Did Wendy’s Lower Its 2017 Earnings Guidance?

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Part 3
Why Did Wendy’s Lower Its 2017 Earnings Guidance? PART 3 OF 8

Analyzing Wendy’s 3Q17 Same-Store Sales Growth in 3Q17

3Q17 performance

In 3Q17, Wendy’s (WEN) posted systemwide SSSG (same-store sales growth) of 1.9% with 2.0% in North America. Analysts expected the company’s SSSG to be 2.4% in North America.

Analyzing Wendy&#8217;s 3Q17 Same-Store Sales Growth in 3Q17

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During the quarter, the company posted SSSG of 2.1% in franchised restaurants, while company-owned restaurants posted SSSG fell 0.5%. The decline was due to lower traffic at its restaurants following Hurricane Harvey and Hurricane Irma. Wendy’s claimed that the hurricanes lowered its SSSG ~0.3%–0.4%. However, some of the lower traffic was offset by the increased check size.

Wendy’s 3Q17 SSSG was driven by menu innovations, implementation of technological advancements, the rise in customer satisfaction, and image activation. During the quarter, the company introduced the $0.50 Frosty, Bacon Queso trio, and the Giant Junior Bacon Cheeseburger. By the end of 3Q17, the company had 39% of its restaurants’ image activated. Also, Wendy’s claimed that image activation contributed 0.7% towards its SSSG in North America.

Moving to technological advancements, Wendy’s implemented the mobile ordering facility in 200 restaurants and kiosks in 100 restaurants. Wendy’s also stated that since the implementation of its new “Voice of the Customer” program, it has been able to increase its satisfaction score by a high single-digit.

Peer comparisons

McDonald’s (MCD) and Burger King operate under Restaurant Brands International (QSR). They posted SSSG of 6.0% and 3.6%, respectively.

In the next part, we’ll look at analysts’ revenue estimates for the next four quarters.


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