Wendy's cuts 2019 forecast as it ramps up investment to launch breakfast nationwide next year
- Wendy's plans to invest about $20 million to support its U.S. stores in preparation for the launch.
- The burger chain and its franchisees will hire 20,000 employees.
- The company now expects adjusted earnings per share to decline by 3.5% to 6.5% in 2019.
Wendy's on Monday cut its 2019 outlook as it plans to ramp up spending for a nationwide launch of breakfast next year.
Shares of the company fell nearly 2% in extended trading. Initially the stock dropped nearly 9%, but then regained much of those early losses. Wendy's stock, which has a market value of $5.1 billion, is up 40% this year, as of Monday's close.
As a result of its entrance into the breakfast wars, Wendy's plans to invest about $20 million to support its U.S. stores in preparation for the launch.
In August, the company said it expected adjusted earnings per share growth of 3.5% to 7%, but it now expects adjusted earnings per share to decline by 3.5% to 6.5% in 2019. Wendy's will provide an update to its 2020 goals at its investor day Oct. 11.
The Dublin, Ohio-based company currently offers breakfast in more than 300 of its restaurants. At the end of 2018, it had 5,810 stores in the United States, according to regulatory filings. To support its breakfast expansion, Wendy's and its franchisees plan to hire an additional 20,000 employees.
Wendy's plans to offer items like the Breakfast Baconator and the Frosty-ccino to entice customers to try its take on breakfast.
In August, the burger chain reported second quarter net income of $32.4 million, or 14 cents per share, up from $29.9 million, or 12 cents per share, a year earlier. In North America, restaurants open at least 15 months saw sales grow by 1.4% during the quarter.
Fast-food burger chains as a whole have seen business slow down. Even McDonald's, which reported U.S. same-store sales growth of 5.7% during its second quarter, continues to experience negative U.S. traffic.
Breakfast is one way to help. The NPD Group found that the early meal is the only restaurant daypart with year-over-year growth. And when it comes to breakfast, customers tend to be loyal.
The war for breakfast customers has been heating up for the last five years, as McDonald's, Burger King and Taco Bell have pushed early morning offerings. But it can be difficult to pry customers away from their favorite breakfast spot.
Burger King, for example, has struggled to compete with McDonald's when it comes to breakfast. This year, the Miami-based chain said it would spend more on marketing for its morning offerings. It started a coffee subscription program for only $5 a month and launched the BK Cafe, similar to McDonald's McCafe.