Wendy's profit view squeezed by rising commodity costs, labor crunch
Reuters
Published Nov 10, 2021 07:07AM ET
Updated Nov 10, 2021 08:35AM ET
(Reuters) -Wendy's Co on Wednesday projected annual profit below market estimates as a widespread labor shortage and rising costs of raw materials eat into the fast-food chain's margins, sending its shares down 4% in premarket trading.
The company said it expected annual adjusted earnings between 79 cents and 80 cents per share, compared with analysts' average estimate of 82 cents, according to Refinitiv.
A worker crunch in the United States has made it difficult for restaurants to ensure adequate staffing, forcing some to hike wages and others like Domino's Pizza (NYSE:DPZ) to cut store hours.
The industry has also reeled under a surge in prices of raw materials from chicken to edible oils and higher freight costs.
Wendy's (NASDAQ:WEN) company-operated restaurant margin, a key measure of profitability, declined to 14.4% in the third quarter from 16.9% a year earlier.
Its U.S.-same store growth of 2.1% also fell short of expectations of 4.4% as rivals McDonald's (NYSE:MCD) and Taco Bell parent Yum Brands launched new menu items and collaborated with celebrities to lure more customers.
But the Dublin, Ohio-based restaurant chain reported a 14.7% jump in same-store sales at its international restaurants, trouncing estimates of a 9.1% rise.
Wendy's also increased its share buyback plan to $300 million, as part of which it would launch a $125 million share repurchase program in the current quarter.
Total revenue rose 4% to $470.3 million in the three months to Oct. 3. Wendy's earned 19 cents per share on an adjusted basis, edging past estimates of 18 cents.
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Written By: Reuters
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