TRADE: While the new burgers continues to help lift same-store sales trends, the combination of beef inflation and lower long-term guidance limits the current upside going into the company analyst meeting on January 30th.
TREND: We are cautious on this duration as rival brands continue to execute on their own remodel strategy. CEO Emil Brolick has admitted that, while menu innovation is important, the full benefit won’t come through until the asset base is upgraded.
TAIL: We view the return of Emil Brolick as a boost to the long term prospects of the Wendy’s brand. The company is still 6 months or so away from communicating lessons from the new remodel testing initiative.
Grub Grade featured a story on the new Wendy’s burger being tested in select markets: a “Black Label” burger available in Bacon Portabella and Spicy Santa Fe varieties. Here is a link to the article describing the product.
As we see the strategy from WEN unfolding, they want to keep the momentum from the new burger launch going. The Wendy’s brand is a premium brand competing against the upstart burger chains like Smashburger and Five Guy’s. Adding a premium burger with a higher price point will help to tier the menu and give customers another premium alternative.
The premium product has been in development prior to the Emil Brolick taking over as CEO but, we understand, the new burger was made a priority. To us, that speaks to Brolick’s intention to focus on menu innovation to improve the image and broaden the appeal of the Wendy’s brand.
The company’s first Investor Day since Brolick took over as CEO is scheduled for January 30th. We believe the overall tone of the meeting will be positive but believe that the bar for EBITDA growth should be set slightly lower. Additionally, expectations around the breakfast opportunity need to be reset lower also. There are some difficult headwinds facing Wendy’s in the breakfast day part and we think they will take some time to resolve.