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The Wendy's Co. said production problems have led to some shortages of beef.

Wendy’s cites ‘spot outages’ of beef, shifts marketing

Burger brand sees breakfast introduction contributing 8% to sales

The Wendy’s Co. said “spot outages” of beef have been temporary, but executives said Wednesday that supplies to restaurants continue.

Todd Penegor, CEO and president of the Dublin, Ohio-based quick-service brand, said on a first-quarter earnings call that “beef suppliers across North America are currently facing production challenges.” Some analysts earlier in the week had reported beef was unavailable at some Wendy’s units.

“Because of this, some of our menu items may be in short supply from time to time at some restaurants,” Penegor said, adding that fresh hamburger is still be delivered to all restaurants two or three times a week.

Some restaurants had taken hamburgers off digital menus to direct customers to other products.

“One of the things that people can do in the digital app and on is if you're tight on beef, you can turn it off in the mobile order,” Penegor explained, which doesn't mean the restaurant is out of beef. “You wouldn't want to really disappoint a consumer if they looked in mobile order and said you had beef, and then they drove to the restaurant and you are out.”

Wendy’s also has “shifted marketing efforts in the short-term to focus on our chicken products to alleviate pressure,” he said. “We're working diligently to minimize the temporary impact to our customers and restaurants and continue to work with our supplier partners to monitor this closely.”

Wendy’s first-quarter commodity inflation was 3.9%, mainly driven by beef, said Gunther Plosch, Wendy’s chief financial officer.

Despite the coronavirus pandemic, Wendy’s said its breakfast introduction on March 2 has gone well. The new daypart sustained about 8% of sales through April, Penegor said.

The nine breakfast menu items and coffee drinks exceeded expectations, he said.

“Through our marketing efforts, both on social media and on air, we quickly achieved over 50% awareness, which is significant as people are recognizing that Wendy's now serves a great breakfast,” Penegor said.

The company is unlikely to do all-day breakfast, like competitor McDonald’s Corp.

“There's complexity that goes along with that as you shift from the breakfast daypart into the lunch day part with how we're managing the grills to prepare the food and to prepare it freshly,” Penegor said. “So we want to stay focused on running great restaurants, really engrain to have it and continue to grow the heck out of the breakfast business. We'll still be in very efficient at lunch and dinner. Maybe someday way down the road, that's another opportunity and another growth wave, but not one that we're looking at in the near-term.”

For the first quarter ended March 29, Wendy’s net income was down 54.7% to $14.4 million, or 6 cents a share, from $31.9 million, or 14 cents a share, in the same period last year. Revenues were down 0.9% to $405 million from $408.6 million in the same quarter last year.

Global same-store sales growth was 3.9% in the two months ended March 1 and down 8.6% in the month ended March 29, the month when the coronavirus pandemic was declared. Subsequent to the end of the first quarter, same-store sales were down 26.7% in the week ended April 5, down 26.2% in the week ended April 12, down 10.1% in the week ended April 19 and 9.9% in the week ended April 26, 2020.

The company said that as of April 26, about 95% of our global restaurants were operating, including approximately 99% of our U.S. restaurants. “Restaurants that are closed Internationally are primarily due to country-wide closure mandates,” the company said.

Wendy’s has taken several actions to enhance financial flexibility, yielding a cash balance of about $350 million as of April 26.

Wendy's, founded in 1969, has more than 6,800 restaurants worldwide.

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Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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