Wendy’s profit surges on shift to franchise operations

NEW YORK (AP) — Wendy’s Co. reported a boost in profit as it dramatically cut costs while it continues to sell company-owned restaurants and shift to a more franchise-heavy operation.

Profit surged more than five-fold to $48.9 million, or 18 cents per share, despite a 22 percent drop in overall revenue. The drop in revenue was more than offset by a 37.9 percent drop in operating profit as it sells back restaurants.

The Dublin, Ohio-based company said it’s still on track with plans to lower its company-run restaurant ownership to about 5 percent of the total system by year’s end. It plans on selling 315 restaurants to franchisees during 2016.

“Our solid third-quarter results demonstrate the positive benefits of our brand transformation efforts,” President and CEO Todd Penegor said. “Despite the ownership of 433 fewer company-operated restaurants relative to last year, we were able to deliver high quality earnings, with franchise revenues contributing a higher amount to the bottom line.”

Meanwhile, sales rose 1.4 percent at stores open at least a year in North America.

Earnings, adjusted for non-recurring gains, came to 11 cents per share, while the hamburger chain posted revenue of $364 million. The results topped Wall Street expectations, with the average estimate of nine analysts surveyed by Zacks Investment Research for earnings of 10 cents per share and six analysts expecting $344.3 million in revenue.

Looking ahead, the company boosted its full-year profit outlook to a range of 40 cents to 41 cents per share from a range of 39 cents to 40 cents per share. It also forecast same-store sales growth of 1.5 percent and boosted its dividend to 6.5 cents per share from 5 cents per share.

Wendy’s shares slipped 2 cents to $11.11 in premarket trading. The stock has climbed 18 percent in the last 12 months.


Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on WEN at https://www.zacks.com/ap/WEN


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