Wendy’s is trying to reinvent itself with relatively higher-quality fast food. But competitors are aggressively promoting cheap eats and stealing away price-conscious customers.
The Dublin, Ohio, company, which is known for its square hamburger patties and Frosty shakes, on Wednesday reported a first-quarter profit that met Wall Street expectations. But sales fell short of Wall Street’s hopes. The company noted that it lost market share in the value category, which accounts for about 20 percent of the fast-food industry.
In a conference call with analysts, CEO Emil Brolick said Wendy’s plans to adjust its marketing to emphasize the 99-cent portion of its revamped “Right Price, Right Size” value menu, which offers options ranging from 99 cents to around $2. The company had replaced its 99-cent menu in January to boost profit margins and give its franchisees more flexibility in pricing.
Brolick emphasized that the company’s push to underscore the quality of its food remains a priority. The effort in part reflects the growing popularity of chains such as Chipotle and Panera, which offer food perceived to be of better quality and that commands higher prices.
For the January to March period, Wendy’s said sales at established company-run stores in North America rose 1 percent, with higher prices offsetting a decline in transactions. The company said bad weather and shifts in the timing of the New Year and Easter holidays hurt its results.
At franchised stores, the metric edged up 0.6 percent.
McDonald’s, meanwhile, said Wednesday that sales at established restaurants rose 0.7 in the United States for April, helped by its new chicken McWraps and value menu. Wendy’s noted that it also has several new items planned, including its “Frosty Waffle Cones” that were introduced this week.
The company said it still expects to remodel half of its company-run restaurants by the end of 2015. Wendy’s has more than 6,500 locations, most of them in North America. In the United States and Canada, about 1,600 of them are company-run.
But Wendy’s is undertaking an image makeover at a tough time for the restaurant industry, with companies fighting over every dollar. McDonald’s is touting its Dollar Menu, and Burger King is offering two sandwiches for $5 and Whopper Jr. burgers for $1.29.
For the period ended March 31, Wendy’s earned $2.1 million, or a penny per share. That’s down from $12.4 million, or 3 cents per share, a year earlier. Last year’s quarter included a gain of $18 million, or 5 cents per share, on the sale of an investment. Excluding certain items, including remodeling costs, earnings in the latest quarter came to 3 cents per share, in line with Wall Street expectations.
Revenue rose 2 percent to $603.7 million versus a year ago but fell short of the $615 million forecast of analysts.