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Wendy’s banks on tech investments

Burger brand’s 1Q earnings exceeded analyst consensus

The Wendy’s Co. is looking at capitalizing on technology and digital investments to enhance its position in the quick-service segment, executives said Wednesday.

“We continue to make meaningful progress with our consumer facing digital capabilities, said Todd Penegor, Wendy’ CEO and president, in a first-quarter investors’ call. “We believe that our operating model is a perfect complement to the technology journey we are on.”

The Dublin, Ohio-based burger brand promoted its delivery platform in the past quarter with a targeted promotion, giving delivery-order customers a free Baconator sandwich or a $5 Biggie Bag, which includes a double-stack burger, four-piece nuggets, small fry and drink

“We believe that being successful in digital will be a competitive advantage for us as consumers are craving customization, speed and convenience all of which can be enhanced through our platforms,” Penegor said.

Kiosks are in about two-thirds of the company’s owned restaurants, and digital scanner technology will rolled out in the second half of the year.

Sales helped Wendy’s report first-quarter earnings of 14 cents a share, exceeding analysts’ consensus of 12 cents a share, according to EarningsWhispers.com. Wendy’s stock price was up about 4% in late-afternoon trading Wednesday, trading at about $19.20 a share, up from Tuesday’s close of $18.47.

Penegor said that, at the end of the first quarter, Wendy’s had its delivery platform in about 75% of its North American restaurants were on a delivery platform, an increase of about 15 percentage points since the end of 2018.

“The growth of our delivery footprint continues to pace ahead of expectations as we remain on track to have 80% of the North America system covered by the end of 2019,” Penegor said, adding that the company was continuing to work on the integration of delivery into its mobile app. That should be completed by the end of the year, he said.

“This integration will allow for a more seamless user experience and will also provide us with more insights to enhance our relationship with our customers as well as improve our overall delivery times,” Penegor said.

He said Wendy’s biggest competitor remained food at home.

“We'll continue to look at this as an opportunity for growing our business into the future,” he said. “And we're in the early innings.” The company works with DoorDash in the United States and SkipTheDishes in Canada.

“We do expect during the course of this year to get DoorDash integrated into our app,” Penegor said. “It means other delivery providers could also be integrated over time, so we're exclusive with DoorDash today, but we'll have opportunity to play that game different as things change into the future. But we're really feeling good that overtime this is another opportunity for another growth leg on our business and our big opportunity still is awareness.”

Once the customers become loyal over time, Penegor said the offers to increase awareness could be scaled back.

Wendy’s also on Wednesday announced a restructuring of its management into domestic and international divisions.

Kurt Kane was promoted to president and chief commercial officer of the U.S. division from his position as chief concept and marketing officer, and Abigail Pringle was promoted to president of the international division, including Canada, and remain as chief global development officer. As part of the reorganization, Penegor said Bob Wright will be leaving as chief operating officer later this month.

For the first quarter ended March 31, Wendy’s net income, including a special benefit from income taxes, increased 48.2% to $31.9 million, or 14 cents a share, from $20.2 million, or eight cents a share, in the same period last year. Revenues increased 7.4% to $408.6 million from $380.6 million in the same quarter last year.

North American same-store sales growth was 1.3% in the quarter.

Same-store sales for the international division were up 10% in the quarter, but development was down because of the planned closure of the brand’s 14 restaurants in the Malaysia market, Penegor said.

Wendy's, founded in 1969, has more than 6,700 restaurants worldwide.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggess

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