Wendy's Expands into UK and Australia, Expects Strong Sales Growth
2023-08-10
The company held an earning call meeting to discuss its third quarter performance and provide updates to investors and analysts. During the meeting, the CEO expressed confidence in the company's expansion into new markets, particularly the UK and Australia. They highlighted their success in the UK market and announced their entry into the Australian market through a franchise partner. The company believes that this expansion is economically viable and has a strong suite of tools to support its growth. They also emphasized their focus on enhancing and improving their restaurant economic model to ensure returns for their franchise community.
The market outlook for the company is positive, with expectations of continued growth in sales and adjusted EBITDA. They have a strong history of delivering meaningful sales and profit growth, even during periods of economic uncertainty. The company's asset-light financial model has consistently generated a substantial amount of cash, with over 100% conversion of net income into free cash flow. They have a strong cash balance and flexible balance sheet, positioning them well to withstand any macroeconomic headwinds. The company's capital allocation policy includes investing in business growth, sustaining an attractive dividend, and utilizing excess cash for share repurchases and debt reduction.
The key drivers of the company's business discussed in the meeting include sales, profit, market expansion, franchise partnerships, suite of tools, restaurant economic model, consumer behavior, income levels, inflation, disposable income, menu offerings, customer base, and the breakfast day part. The company plans to expand into new markets, enhance and improve the restaurant economic model, and offer a strong suite of tools such as build-to-suit, pacesetter, and groundbreaker. They have announced their entry into the Australian market with a franchise partner and aim to attract customers to try their breakfast offerings and trade them into other occasions and menu items.
During the meeting, the company highlighted several important key performance indicators (KPIs). They discussed the incrementality of sales from late-night focus, the percentage of restaurants open till midnight or later, and the importance of personalized user experiences on digital platforms. The company emphasized the significance of driving additional sales during late-night hours, as they represent new business. They also expressed their commitment to expanding late-night operations, with 90% of their system open till midnight or later. Additionally, the company discussed their efforts to create personalized user experiences for customers through digital channels, leveraging data to customize offers based on customer preferences.
The company's outlook for the quarter and year is positive, with expectations of significant sales and adjusted EBITDA growth. They project a 30% increase in 2023 compared to 2019. The company plans to continue investing in growth, maintain dividends, repurchase shares, and reduce debt. They have made significant progress on their strategic initiatives, achieving over 20% growth in sales and adjusted EBITDA in the last three years. By the end of 2022, they saw an increase of $2.4 billion in systemwide sales and $85 million in adjusted EBITDA compared to 2019. This growth was driven by investments in breakfast, digital, and development initiatives. The company's financial model has proven to be resilient and predictable, generating strong cash flow. They consistently convert over 100% of their net income into free cash flow, outperforming competitors in the Quick Service Restaurant (QSR) category.
The company's capital spending plans include investing in its business for growth while maintaining an asset-light model, sustaining an attractive dividend, utilizing excess cash for share repurchases and debt reduction, and repurchasing shares and debentures. The company aims to invest in growth initiatives, provide returns to shareholders through dividends and share repurchases, and reduce debt.
The meeting included participation from Kelsey Freed, Director of Investor Relations, Todd Penegor, President and Chief Executive Officer, Gunther Plosch, Chief Financial Officer, and analysts from various firms. This diverse group of participants indicates a high level of interest in the company and suggests that the call was an important event for investors and analysts.
The company's performance in digital sales has been strong, with a digital sales mix of over 17% internationally and over 11% in the US. They attribute this growth to their March Madness programming and late-night advertising. The company also has a loyalty program with over 3.5 million monthly active users and a one-to-one marketing program. They are focused on testing new technologies and expect significant sales growth in delivery, mobile order, and kiosks. The company projects global digital sales to reach over $1.5 billion this year. Additionally, they have opened 41 new restaurants in the second quarter and are making progress in their international growth markets.