Wendy's withdraws outlook, cuts dividend as U.S. sales drop 7%

Net income falls to $32.6 million from year-ago $55.1 million

Wendy’s withdrew its annual guidance and cut its quarterly cash dividend to 7 cents a share from 14 cents as it works to return to sales growth at its U.S. restaurants. The fast-food chain said the moves will help fund turnaround initiatives after U.S. same-restaurant sales fell 7% in the second quarter.

“Today we are clearly not performing at our potential,” said Chief Executive Bob Wright, who returned to the fast-food chain in May to oversee its turnaround. Wright said the company’s traffic, value proposition and franchisee economics aren’t currently meeting expectations.

In an effort to boost sales, the company will rebuild its menu to offer more compelling value and step up its marketing efforts, while also investing in operations, digital capabilities and its restaurants, Wright said. To help fund these initiatives, Wendy’s cut its quarterly dividend.

Wendy’s also withdrew its outlook for the year, saying its new management needs time to fully assess the business opportunities and formulate a comprehensive turnaround plan.

The updates came as Wendy’s recorded a 7% drop in same-restaurant sales in the U.S., which drove a 6.5% decrease in overall systemwide sales. Analysts were expecting a 4.7% decline in overall same-restaurant sales.

For the three months ended June 28, Wendy’s posted net income of $32.6 million, or 17 cents a share, compared with $55.1 million, or 29 cents a share, in the year-ago period. Stripping out certain one-time items, earnings were 18 cents a share; analysts polled by FactSet had expected adjusted earnings of 16 cents a share.

Revenue reached $570.6 million, coming in ahead of Wall Street models for $557.1 million.

The reduced dividend, equal to 28 cents a year, represents an annual yield of about 3.8%, based on Thursday’s closing price of $7.39. It will be paid Sept. 15 to shareholders of record as of Sept. 1, the company said.