Wendy’s withdraws outlook and draws down revolver as same-store sales plunge 20%
The Breakfast Baconator and Seasoned Potatoes are part of the breakfast menu at Wendy’s restaurants on March 2, 2020 in New York City.
David Dee Delgado | Getty Images
Wendy’s on Thursday announced measures to support its franchisees and its own liquidity as the coronavirus pandemic drives down its same-store sales by 20%.
The Dublin, Ohio-based company has also withdrawn its 2020 forecast, as well its long-term outlook for 2021 to 2024. The company previously expected to earn between 60 cents and 62 cents per share, on an adjusted basis, in fiscal 2020 on sales in a range of $12 billion to $12.5 billion. Between 2021 to 2024, Wendy’s annual global system-wide sales were expected to grow by 4% to 5%.
In the week ended March 22, same-store sales have plunged 20%. Drive-thru orders made up about 90% of sales, while digital orders accounted for 4.3%, up from 2.5% in 2019.
The burger chain launched its breakfast nationwide for the first time on March 2. That week, breakfast sales rose about 15%. Breakfast represented a big initiative for the company, which invested about $20 million in 2019 to support the launch in U.S. restaurants. Wendy’s anticipated that breakfast sales would eventually grow to at least 10% of its total daily sales.
Citing the launch’s strong early performance, the company intends to stop advertising that is only focused on breakfast and instead support franchisees in other ways. Wendy’s was originally planning on spending between $70 million to $80 million in 2020 promoting the breakfast menu.
To support its franchisees, Wendy’s is extending payments for royalties and marketing funds by 45 days for the next three months. Franchisees who rent property from Wendy’s will have their base rent payments deferred by 50% over the same period. Franchisees will also have an extra year to renovate their restaurants and fulfill new restaurant development requirements.
The company has fully drawn down its revolving financing facility and suspended its buyback program. Including the draw down of $120 million, Wendy’s has about $340 million in cash.
Wendy’s has temporarily shuttered 46 U.S. restaurants and 189 international locations.
Shares of Wendy’s rose 3% in morning trading. The stock, which has a market value of $3.3 billion, has fallen 33% so far in 2020.