Analysts expect Wendy’s (WEN) to post revenue of $405.6 million in the third quarter, which represents a rise of 31.7% from $308.0 million in the corresponding quarter of 2017. The company’s revenue growth is expected to be driven by the adoption of a new accounting standard, the addition of new restaurants, and positive SSSG (same-store sales growth).
The new accounting standard mandates the reporting of funds raised from franchisees for marketing under revenue and the addition of the same amount to operating costs, which will increase the company’s revenue during the quarter.
By the end of the second quarter, Wendy’s operated 6,324 franchised restaurants and 332 company-owned restaurants. Compared to the restaurant count at the end of the third quarter of 2017, the company operated 70 more franchised restaurants at the end of the second quarter of 2018, while the unit count of its company-owned restaurants fell by one. The addition of these new restaurants, along with restaurants opened in the third quarter, is expected to drive the company’s revenue.
To drive its SSSG, Wendy’s is focusing on expanding its delivery service, reimaging old restaurants, innovating its menu, and pursuing marketing and promotional initiatives. By the end of the second quarter, the company had expanded its delivery service to 40% of its North American restaurants by partnering with DoorDash in the United States and SkipTheDishes in Canada. The company had also reimaged 46% of its global restaurants by the end of the second quarter to enhance the customer experience.
Moving on to menu innovations, Wendy’s introduced the Harvest Chicken Salad during the third quarter. In the second quarter, the company launched the Southwest Avocado Chicken Sandwich, the Berry Burst Chicken Salad, and the $1 Buffalo Ranch Crispy Chicken Sandwich, which are expected to have driven its SSSG during the quarter.
Peer comparison and outlook
During the same period, McDonald’s (MCD), and Restaurant Brands International (QSR) posted revenue rises of -6.7% and 13.8%, respectively. Analysts expect Jack in the Box’s (JACK) revenue to fall 47.9%.
For 2018, analysts expect Wendy’s to post revenue of $1.60 billion, which represents revenue growth of 30.5% from $1.22 billion in 2017. Next, let’s look at analysts’ EPS expectation for the third quarter.