Restaurants

Wendy's raises its forecast for 2021, as its breakfast and chicken sandwich boost sales

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Key Points
  • Wendy's reported better-than-expected earnings Wednesday.
  • The company said it expects sales of its breakfast items to grow, prompting it to raise its forecast for the rest of the year.
  • The fast-food chain's new chicken sandwich also boosted sales and helped it to grab a bigger piece of the competitive category.

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A Wendy's food order is prepared at the Rebel Foods Ltd. cloud kitchen in Noida, India, on Friday, March 12, 2021.
Bloomberg | Getty Images

Its bet on breakfast is paying off as Wendy's reported better-than-expected earnings Wednesday and raised its forecast for the year.

Shares in the fast-food chain were recently down about 2%, as stocks in the broader market slumped. After its earnings were released, the stock had risen more than 5%.

It now expects adjusted earnings of between 72 cents and 74 cents per share, compared with previous estimates of adjusted earnings between 67 cents and 69 cents per share.

The company has spent $3.5 million on advertising to promote its breakfast items. It expects both its business abroad and its breakfast menu to see improving sales ahead.

"We could not be more pleased with the momentum in our business that continued in the first quarter of 2021 as sales significantly exceeded our expectations and fueled our restaurant economic model, leading to outsized profits," President and Chief Executive Todd Penegor said on the earnings call.

In the first quarter, the company's reported net income rose to $41.4 million, or 18 cents a share, up from $14.4 million, or 6 cents a share, a year ago.

On an adjusted basis, Wendy's earned 20 cents per share, topping average analyst estimates of 15 cents a share, published in a Refinitiv survey.

Revenue rose to $460.2 million from $405 million a year ago. That also was higher than the $444 million analysts had predicted.

The restaurant chain's global same-store sales rose 13% from a year ago.

Wendy's said a recently launched chicken sandwich sold very well during the quarter.

"The strength of the Classic Chicken, along with the success of the Jalapeno Popper, has allowed us to compete very well in the chicken sandwich category. In fact, our share of breaded chicken sandwiches within QSR grew in the month of March, despite significant competitive activity," Penegor said.

Both Yum Brands' KFC and McDonald's have also recently debuted chicken sandwiches. The category has been so heated that it is starting to encounter tightening supplies of chicken.

Wendy's repurchased $56 million worth of stock in the first quarter and increased its share repurchase authorization by $50 million to $150 million.

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