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What Drove Wendy’s Revenue in 1Q18?

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1Q18 revenue

Wendy’s (WEN) posted revenue of $380.6 million in 1Q18, which represents a rise of 33.1% from $285.2 million in 1Q17. The company’s 1Q18 revenue outperformed analysts’ revenue estimate of $379.5 million.

Due to a new accounting standard, the company had included $78.9 million collected from franchisees for marketing in its 1Q18 revenue. Removing the advertising fund, we see that Wendy’s adjusted revenue stood at $301.7 million, which represents growth of 6.7%. The revenue growth was driven by the addition of new restaurants and positive SSSG (same-store sales growth).

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Revenue growth across segments

  • Company-owned restaurants: This segment posted revenue of $153.7 million, which represents growth of 3.7% from its $148.2 million in 1Q17. The revenue growth was driven by the net addition of six restaurants in the last four quarters and positive SSSG of 0.8%.
  • Franchised restaurants: This segment posted revenue of $148.1 million, which represents growth of 7.6% from $137.6 million in 1Q17. The revenue growth was driven by positive SSSG, the addition of 76 franchised restaurants, and an increase in rent collected from franchisees. Franchised restaurants had posted SSSG of 1.7% in North America and 1.8% in International markets in 1Q18, which we’ll discuss in detail in the next part of this series. The revenue from franchise rent increased $7.2 million to $50.1 million due to franchise flips completed in 2017.

Peer comparisons

For the same period, McDonald’s (MCD) and Restaurant Brands International (QSR) posted revenue growth of -9.5% and 25.3%. Jack in the Box (JACK) is expected to post a decline in revenue of 42.8%.

Next in this series, we’ll look at Wendy’s 1Q18 SSSG.

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