The Wendy’s Co (NASDAQ:WEN) smashed the expectations of analysts this morning, and shares soared as much as 11 percent in premarket trading as a result before retreating slightly. The company reported second quarter profits, higher margins and better same-store sales during the quarter. Adjusted earnings per share were 8 cents, while earnings per share were 3 cents. Consolidated revenues were $650.5 million.
Analysts were expecting the fast food chain to report earnings of 6 cents per share on $658 million in revenue for the quarter.
Wendy’s Co releases preliminary second quarter results
Company-operated same-store sales rose .4 percent in North America, while franchise same-store sales rose .3 percent. Company-operated margins were 16.7 percent during the second quarter, compared to 14.1 percent last year. Wendy’s attributed the improvement to better sales mix, improved labor management, reductions in breakfast advertising and lower costs for paper products and beverages.
Net income attributable to The Wendy’s Co (NASDAQ:WEN) was $12.2 million, compared to a net loss of $5.5 million in the same quarter a year ago. This year’s results also included a $21 million pretax charge because the company extinguished some of its debt early. Last year’s results had a $25.2 million pretax charge for the same reason.
Wendy’s Co to sell 425 company-operated restaurants
In today’s report, The Wendy’s Co (NASDAQ:WEN) said it would begin concentrating on certain geographic locations and cut down total system ownership from 22 percent to 15 percent by selling 425 restaurants to franchise operators. The chain said it plans to complete the transactions by the second quarter of next year. Franchise operators with a well-established history of excellence will receive priority in regards to the sale of the company-owned stores.
It also said it will continue to transform the Wendy’s brand through reimaging and new restaurant development, the focus on the new Wendy’s logo, updated menu boards, new products and new packing. On Monday The Wendy’s Co (NASDAQ:WEN) said it completed the sale of 24 restaurants in the Kansas City area to NPC International, Inc., which is the biggest franchise operator for Pizza Hut and also the eighth biggest restaurant in the U.S. It also sold five restaurants in the same market to Kirk Williams of Legacy Restaurant Group.
Wendy’s Co expects to see better financial performance ahead
Because of its rebranding and geographically centric focus, The Wendy’s Co (NASDAQ:WEN) expects to see its financial performance improve. It expects to see annualized general and administrative expenses to fall to $30 million by the end of the second quarter of next year. It also expects to realize about $20 million in efficiencies by consolidating some operations.
In addition, it expects its company-operated restaurant operating margin to be 50 basis points or more and its cash flow to improve. It’s looking for a long-term adjusted earnings per share growth rate in the mid-teens starting next year, which is ahead of its previous guidance of high single-digit to low double digit-growth.
Wendy’s Co increases capital return to shareholders
The Wendy’s Co (NASDAQ:WEN) announced a 25 percent increase in its dividend, which went from 4 to 5 cents per share. The increase is effective with the next dividend payable on Sept. 17 to shareholders of record on Sept. 3. The chain did not buy back any shares during the second quarter, although it intends to do so in the third quarter.