Wendy's (WEN) Fiscal Q2 EPS Beats by 16%

Key Points

• Adjusted (non-GAAP) earnings per share exceeded expectations at $0.29, compared to the $0.25 estimate, on modest GAAP revenue outperformance.

• U.S. same-restaurant sales fell 3.6%, highlighting continued weakness in the domestic market.

• The company sharply lowered its outlook for revenue, adjusted profit, and free cash flow.

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Wendy's (NASDAQ:WEN), the quick-service restaurant chain known for its fresh hamburgers and customizable menu, released results for the second quarter of fiscal 2025 on August 8, 2025. The earnings release underscored persistent negative trends in the U.S. business, including declining same-restaurant sales (down 3.6%) and systemwide sales (down 3.3%), as well as a significant cut to the company's full-year outlook. The period showed international momentum as a bright spot, with international systemwide sales growth of 8.7%, but overall, the quarter reflected ongoing challenges for the domestic core business.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Model and Strategic Focus

Wendy's operates as one of the largest hamburger-focused quick-service restaurant chains, with over 7,300 restaurants worldwide. The company relies heavily on a franchising strategy: most locations, both in the U.S. and internationally, are operated by franchisees. This model enables expansion with lower capital requirements and increases earnings from royalties and fees.

In recent years, Wendy's has prioritized several key areas: expanding its international presence, investing in digital tools such as its app and automated drive-thru ordering, and launching creative menu innovations. Success for the business depends on growing systemwide sales, improving franchisee economics, maintaining food quality, and gaining market share in an intensely competitive quick-service landscape.

Quarter Highlights: Financial Results and Operating Performance

The quarter's financial performance edged ahead of analyst expectations, with both non-GAAP EPS and GAAP revenue exceeding consensus. Adjusted earnings per share rose to $0.29, beating forecasts by 15%. Revenue (GAAP) also slightly surpassed consensus. However, Compared to the year-ago period, company revenue (GAAP) declined by 1.7%. Adjusted revenue and global same-restaurant sales were also down from the prior year, reflecting pressure across the core U.S. market.

The U.S. business continues to face notable headwinds. Same-restaurant sales in the U.S. fell 3.6%, compared to a 0.6% increase in Q2 FY2024. Systemwide sales for U.S. restaurants dropped 3.3% to $3.13 billion. Management attributed this decline to factors including traffic decreases, continued cost inflation, and softening consumer demand, especially among households earning less than $75,000, where industry-wide quick-service restaurant traffic was down by high single digits to low double digits in March 2025. The decline in U.S. company-operated restaurant margin to 16.2% from 16.5% was driven largely by rising food and labor costs alongside falling customer traffic.

Despite these domestic pressures, the international segment delivered growth and now represents a growing share of Wendy's expansion. International same-restaurant sales increased 1.8%, and total systemwide sales internationally rose 8.7%. The company opened 17 net new international locations and 9 net new U.S. restaurants.

Profitability measures improved slightly versus the prior year due to cost controls. Adjusted EBITDA climbed 2.5%, and Net income (GAAP) rose 0.9% year-over-year. General and administrative expenses fell by 3.3%, as Wendy's reduced incentive compensation.

Restaurant innovation remains a consistent area of focus. The company developed new menu offerings and partnerships, including "Thin Mint Frosty" desserts and collaborations with brands like Takis, Pop Tart, and Oreo. It continued expanding breakfast options and refreshing the coffee platform. Digital transformation also progressed, with new features in the Wendy’s app, ongoing rollouts of digital menu boards, and the deployment of its drive-thru automated order-taking system — known as Fresh AI — targeting 500 locations by year-end. These moves are intended to drive customer engagement, operational efficiency, and check size.

Wendy's remained active in returning cash to shareholders. It repurchased 4.8 million shares for $61.9 million and declared a $0.14 per share quarterly dividend, unchanged from the prior period.

Looking Ahead: Guidance and Areas to Watch

Wendy's leadership sharply lowered its full-year outlook, now expecting global systemwide sales growth of (2.0)% to flat, adjusted earnings per share of $0.92 to $0.98, and adjusted EBITDA of $530 to $545 million. The company now expects global systemwide sales to decline between 5.0% and 3.0%, adjusted earnings per share in the range of $0.82 to $0.89, and adjusted EBITDA of $505 to $525 million. Expected free cash flow (non-GAAP) was cut to a range of $160 to $175 million. These revisions reflect management's belief that current consumer pressures, especially in the U.S, will persist through the remainder of the year.

The outlook for net restaurant openings remains unchanged, with a reaffirmed target for 2-3% unit growth. The company continues to emphasize restaurant expansion outside the U.S, digital sales growth, and product innovation — including a planned revamp of the chicken menu later in the year. Wendy's management provided no new details on long-term U.S. turnaround plans, but franchisee profitability and operational improvements remain key priorities. The company cautioned about ongoing economic uncertainty, cost inflation, and competitive dynamics that may impact future quarters.

The quarterly dividend was maintained at $0.14 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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