Wendy’s sees Q1 profits fall by almost 10%

Wendy’s has reported that its operating profit dropped 9.9% to $74.9m (£61.46m) in the first quarter of FY22, compared to $83.1m (£68.19m) in the same period last year, due to higher general and administrative expenses and a decrease in the company-operated restaurant margin. 

Wendy’s company-operated restaurant margin fell 5.4% to 11.6% which was reportedly due to higher commodity and labour costs, customer count declines, and the impact of the company’s investments to support the entry into the United Kingdom market.

Nonetheless, total revenues increased 6.2% from $460.3m (£377.72m) to $488.6m (£400.94m) which was driven by higher sales at company-operated restaurants, driven largely and the acquisition of 93 franchise-operated restaurants in Q4 FY21, partially offset by the sale of 47 company-operated restaurants in in Q2 FY21.

Wendy’s said its revenues also benefited from an increase in franchise royalty revenue and advertising funds revenue, both of which increased largely due to higher same-restaurant sales.

However, adjusted EBITDA fell 11.6% from $121m (£99.29m) to $106.9m (£87.72m) and net income also dropped 9.6% from $41.4m (£33.97m) to $37.4m (£30.69m).

According to the company, the decrease in net income resulted from a decrease in operating profit, which was partially offset by lower interest expense as a result of the company’s debt refinancing completed in Q2 FY21.

Looking ahead to the rest of the year, Wendy’s continues to expect global systemwide sales growth of 6-8% and adjusted EBITDA of $490m (£402.09m) to $505m (£414.4m).

Todd Penegor, president and chief executive officer, said: “We had one of our best quarters in our history for unit growth, with over 90 new restaurant openings, and are on track to reach our planned net unit growth goal of 5-6% for the year. We also competed well with global same-restaurant sales up double digits once again on a two-year basis.

“We are well positioned to win in this volatile environment, with strong franchisee alignment behind our strategies, and have strengthened our balance sheet with the successful debt raise transaction we recently completed.”