Trading On margin

Wendy’s earnings outlook dampened by rising raw material costs and labor shortage By Reuters


© Reuters. FILE PHOTO: A Wendy’s restaurant displays a “Now Hiring” sign in Tampa, Florida, United States June 1, 2021. REUTERS / Octavio Jones

(Reuters) – Wendy’s Co forecast lower annual profit than market estimates on Wednesday as widespread labor shortages and rising raw material costs eat away at the fast food chain’s margins, pushing shares down 4% in pre-market trade.

The company said it expected adjusted annual profit of between 79 and 80 cents per share, compared to an average analyst estimate of 82 cents, according to Refinitiv.

A workers’ crisis in the United States has made it difficult for restaurants to ensure adequate staffing, forcing some to raise wages and others like Domino’s Pizza (NYSE 🙂 to cut store hours.

The industry has also faltered under soaring prices for raw materials, from chicken to edible oils and higher transportation costs.

Margin at restaurants operated by Wendy’s (NASDAQ :), a key measure of profitability, fell to 14.4% in the third quarter from 16.9% a year earlier.

Its 2.1% growth in the United States was also below expectations of 4.4%, as rivals McDonald’s (NYSE 🙂 and Taco Bell parent Yum Brands launched new menu items and collaborated with celebrities to attract more customers.

But the Dublin, Ohio-based restaurant chain reported a 14.7% increase in same-store sales at its international restaurants, beating estimates of a 9.1% increase.

Wendy’s also increased its share repurchase plan to $ 300 million, under which it would launch a $ 125 million share repurchase program in the current quarter.

Total revenue increased 4% to $ 470.3 million in the three months to October 3. Wendy’s gained 19 cents per share on an adjusted basis, beating previous estimates of 18 cents.

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