November 6, 2019 / 2:20 PM / a month ago

Wendy's sales warm on spicy chicken; burger chain looks to breakfast rollout

NEW YORK (Reuters) - Wendy’s Co (WEN.O) reported strong North American sales on Wednesday, powered by spicy chicken nuggets and other special menu items, while the fast-food burger chain looks ahead to its launch of breakfast next year.

FILE PHOTO: A signboard of Wendy's fast food restaurant is pictured in Tokyo, Japan, September 26, 2017. REUTERS/Kim Kyung-Hoon/File Photo

Sales at North American restaurants open at least a year rose 4.4% in the third quarter ended Sept. 29. Wendy’s raised its full-year outlook for global systemwide sales to 3.5% to 4%, from 3% to 4%.

Adjusted revenues rose 10% to $351.1 million.

While the $5 Biggie Bag deal, burgers loaded with bacon and items on its “Made to Crave” menu helped drive sales, the Dublin, Ohio-based company is also focused on its 2020 launch into breakfast.

When it announced in September that it would start selling breakfast food next year, some analysts were initially skeptical and share prices dipped.

However, the move also added pressure on rivals in the competitive breakfast arena, including McDonald’s Corp (MCD.N) and Dunkin’ Brands Group Inc (DNKN.O).

Wendy’s plans to accelerate its growth through breakfast, digital ordering and international expansion, Chief Executive Todd Penegor said during a call with investors on Wednesday.

He said he was confident the company could increase breakfast offerings to at least 10% of U.S. sales.

“We’re in this to play the long-term game. And we know that changing people’s behaviors takes a little bit of time,” he said.

During the call, Oppenheimer & Co analyst Brian Bittner said his firm believed Wendy’s would be spending nearly $50 million to advertise its breakfast menu and asked how that would roll off over time.

Chief Financial Officer Gunther Plosch said Wendy’s would “make sure the company is providing funds” for the first three years to spend on national advertising for breakfast.

In 2020, investments in breakfast would still lead to financial losses, but less than the $20 million of spending this year, with breakfast becoming profitable in 2021.

The chain previously said it would have to add about 20,000 new employees to launch into breakfast nationwide.

Overall, store traffic was lower, which was expected, though no details were released.

Bernstein analyst Sara Senatore noted that though Wendy’s North American comparable sales beat expectations, they lagged larger peers. McDonald’s and Restaurant Brands International Inc’s (QSR.TO) Burger King recently reported 4.8% and 5% sales growth, respectively.

Internationally, Wendy’s said it can grow to 1,500 restaurants and double sales to about $2 billion by 2024, by expanding in existing markets and entering Europe with new company restaurants in Britain within the next 12 to 18 months.

The company also hopes to boost orders from digital platforms - including delivery, mobile and in-store kiosks - to 10% of U.S. sales by 2024, versus about 2% now.

Wendy’s will also launch a loyalty program in early 2020.

Reporting by Hilary Russ; Additional reporting by Nivedita Balu in Bengaluru; Editing by Steve Orlofsky and Jonathan Oatis

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