Wendy's Q1 Profit Down, But Tops View; Lifts 2016 Adj. Profit Outlook

(RTTNews) - Wendy's Co. (WEN) reported a profit for the first quarter ended April 3, 2016 that declined 7.8 percent from last year. The company raised its 2016 outlook for both Adjusted Earnings per Share and Adjusted EBITDA.

WEN closed Tuesday regular trading at $11.18, up $0.17 or 1.54 percent. In the pre-market trade, the stock gained $0.37 or 3.31 percent.

President and Chief Financial Officer Todd Penegor said that the Company's first-quarter results exceeded its expectations. "Our strong first-quarter demonstrates the continued momentum of our core business, as well as the positive impact of our system optimization and Image Activation growth initiatives."

Net income for the first quarter of 2016 declined 7.8 percent $25.36 million from last year's $27.51 million, while earnings per share improved to $0.09 from $0.07 in the first quarter of 2015.

Reported earnings per share from continuing operations were $0.09 in the first quarter of 2016, compared to $0.05 in the first quarter of 2015. The increase was partly the result of a 26.4 percent year-over-year reduction in the weighted average diluted shares outstanding.

Adjusted earnings per share from continuing operations were $0.11 in the first quarter of 2016, compared to $0.06 in the first quarter of 2015. Analysts polled by Thomson Reuters expected the company to report earnings of $0.06 per share for the first-quarter. Analysts' estimates typically exclude special items.

Revenues were $378.8 million in the first quarter of 2016, compared to $451.8 million in the first quarter of 2015. The 16.2 percent decrease resulted primarily from the ownership of 375 fewer Company-operated restaurants at the end of the 2016 first quarter compared to the beginning of the 2015 first quarter. Wall Street analysts had a consensus revenue estimate of $352.08 million for the first-quarter.

As previously announced, Chief Executive Officer Emil Brolick intends to retire from management duties with the Company at the time of the Company's Annual Meeting of Stockholders on May 26, 2016. Brolick will be succeeded as CEO by current President and Chief Financial Officer Todd Penegor. Penegor will transition his duties as CFO to Gunther Plosch during the month of May, and Penegor will retain his position as President upon his appointment as CEO.

The Company expects that Brolick will continue to serve on the Company's Board of Directors following his retirement to ensure continuity of leadership and strategic focus for the Company.

Same-restaurant sales increased 3.6 percent at North America system restaurants in the first quarter of 2016.

The company remains on track with its plan to reduce its Company-operated restaurant ownership to approximately 5 percent of the total system. As part of this plan, the Company intends to sell a total of approximately 315 restaurants to franchisees during 2016, including 55 restaurants that were sold in the first quarter. The planned sale of these restaurants follows the sale of 826 restaurants in 2013, 2014 and 2015 as part of the Company's system optimization initiative.

The Company and its franchisees plan to reimage 430 total North America system restaurants and build 110 new North America restaurants in 2016. This is in addition to the 519 total North America system reimages and new restaurants built during 2015.

The Company announced the declaration of its regular quarterly cash dividend of $0.06 per share, payable on June 15, 2016, to shareholders of record as of June 1, 2016.

The Company increased its outlook for 2016 Adjusted Earnings per Share to $0.38 to $0.40 from its prior guidance of $0.35 to $0.37 and increasing its outlook for 2016 Adjusted EBITDA to down 1 percent to up 1 percent compared to 2015 from its prior guidance of down 2 percent to flat. Analysts expect annual earnings of $0.36 per share.

The Company now expects 2016 Commodity costs to decrease approximately 3 percent compared to 2015.

In addition, the Company continues to expect 2016 same-restaurant sales growth of approximately 3 percent for the North America system.

The Company continues to expect to achieve North America system goals by the end of 2020: it expects Average unit sales volumes of $2.0 million, Restaurant margins of 20 percent

As previously reported, the Company engaged cybersecurity experts earlier this year to conduct a comprehensive investigation into unusual credit card activity at some Wendy's restaurants. Based upon the investigation to date, approximately 50 franchise restaurants are suspected of experiencing, or have been found to have, unrelated cybersecurity issues. The Company and affected franchisees are working to verify and resolve these issues.