WEN - Wendy's sees comparable sales sizzle in Q1

2023-05-10 07:20:22 ET

The Wendy's Company ( NASDAQ: WEN ) reported systemwide sales growth of 10.0% in Q1, led by a 21.0% jump in the international business and 8.6% increase in the U.S. The increase in revenue resulted primarily from higher sales at company-operated restaurants, an increase in franchise royalty revenue, and an increase in advertising funds revenue.

Same-restaurant sales were up 8.0% for the quarter, with international same-restaurant sales 13.9% higher and U.S same-restaurant sales up 7.2% vs. +6.7% consensus.

U.S. company-operated restaurant margin improved to 14.7% of sales from 12.0% a year ago. The increase in U.S. company-operated restaurant margin was primarily the result of a higher average check. The increase was partially offset by higher commodity and labor costs, as well as customer count declines.

The global reimaging completion percentage rose to 80.0% from 74.0% a year ago.

Wendy's ( WEN ) churned up adjusted EBITDA of $125.6M during the quarter vs. $106.9M a year ago. The increase in adjusted EBITDA resulted primarily from higher franchise royalty revenue and an increase in U.S. company-operated restaurant margin.

Free cash flow was $63.7M vs. $44.4M a year ago. The increase in free cash flow resulted primarily from a decrease in payments for incentive compensation and higher net income adjusted for non-cash expenses. Those increases were partially offset by the timing of receipt of franchisee rental payments in the first quarter of 2022.

CEO update: "We delivered our sixth consecutive quarter of double-digit global same-restaurant sales growth on a two-year basis driven in part by our compelling marketing programs, continued operational improvements, and the significant acceleration of our digital business. Our sales growth contributed to an over 250 basis point year-over-year expansion in U.S. Company-operated restaurant margin. Our successful start to the year and clear alignment behind our strategic pillars give us confidence that we will deliver meaningful global growth for the remainder of 2023 and beyond."

Looking ahead, the restaurant operator continues to expect global systemwide sales growth of 6% to 8%.

Shares of Wendy's ( WEN ) fell 0.30% in premarket action on Wednesday.

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