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Social media and fresh beef help Wendy’s Q1

Chain gains share in the burger sector despite a tough market

“Nuggs” and fresh beef were good for The Wendy’s Co. in the first quarter.

The Dublin, Ohio-based chain said its North America same-store sales increased 1.6 percent in the first quarter — the 17th straight quarterly increase for the Dublin, Ohio-based company.

On a two-year basis, same-store sales are up 5.2 percent, and company executives said the chain increased its share of traffic in the highly competitive quick-service burger business.

“Our fresh, never frozen beef messaging resonated with customers,” CEO Todd Penegor said on the call Wednesday. “And our strong social media focus generated significant attention in the quarter.” 

Notably, that attention came through the “Nuggs for Carter” Twitter storm, in which teenage Twitter user Carter Wilkerson broke a Twitter retweet record in a bid to win free chicken nuggets from Wendy’s for a year. 

But the company also generated attention for its irreverent tweets, which have often roasted its competitors — including both McDonald’s Corp. and Burger King. 

Executives said the company pushed fresh beef during the period. They also got some help from one of those aforementioned competitors. 

McDonald’s has been testing fresh Quarter Pounders in Dallas and Tulsa, potentially taking away one of Wendy’s major points of differentiation.

Penegor, however, said, “We didn’t see any material impact to our business” in those markets. And he noted that the chain, “Had fun in the social media landscape” after McDonald’s made that announcement — especially given that McDonald’s is only offering some of its burgers with fresh beef.

But McDonald’s shift to fresh beef did give Wendy’s strategies “credibility,” Penegor said.

“It does create more awareness,” he said. “It gives some credibility to what we’ve been saying for almost 40 years. Fresh beef tastes better, and the consumer prefers it.”

Wendy’s stock rose more than 5 percent on Wednesday. The stock hit a 52-week high, and also its highest point since the recession.

One reason investors cheered was the company’s suggested confidence in its sales projections for the year. Wendy’s says its same-store sales will increase 2 percent to 3 percent for the full year, meaning the company expects its sales will improve as the year goes on. 

“We’ve been out in the market testing a lot of things,” Penegor said. “We feel good about the confidence we can deliver 2 percent to 3 percent growth regardless of what the competition throws at us.”

Wendy’s has what it calls a “high-low” marketing strategy, with premium items combined with promotion of its 4-for-$4 value offering.

Value remains an important component of the company’s strategy, Penegor said.

“There’s a lot of value messaging in the competitive set,” Penegor said. He added that the 4-for-$4 offer, along with its quality messaging “has set ourselves apart” in the market. 

The discounting does hold some risks for the company. Executives said the company’s commodity costs are expected to increase 1.5 percent to 2 percent this year. That’s coming on top of expected increases in labor costs. 

Executives said they are “very diligent not to take price” in the market despite the impact on the profitability.

To fix that, executives said they are focused first on driving traffic into the stores. That provides companies with “operating leverage, it increases penny profit and brings more money to the bottom line,” Penegor said.

The company is also investing in technology, including back-of-house automation to improve labor efficiency. But executives also think front-of-house technology helps, too. 

That includes kiosks — Wendy’s says kiosk ordering will be in 1,000 locations by the end of the year.

And the company is expanding its mobile ordering. Penegor said the company expects mobile ordering will be in half the system by the end of the year.

Wendy’s is also planning to test a customer loyalty program by the end of the year. And the chain is testing delivery, with Door Dash, in Columbus. 

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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