Wendy's has outlined its growth trajectory through 2028, but analysts at Wedbush Securities characterize these projections as potentially 'unnecessarily aggressive' given the current low valuation of the fast-food chain. The company announced its expectations for systemwide sales to increase by 5% to 6% annually in the long-term, aiming for total sales between $17.5 billion and $18 billion by 2028.
Additionally, Wendy's anticipates a 3% to 4% annual growth in net restaurant units, targeting a range of 8,100 to 8,300 locations by 2028. In the near term, Wendy's reaffirmed its forecast for global systemwide sales growth for the year 2025, citing a range of 2% to 3%. Analysts from Wedbush suggest that this growth projection may be driven by positive developments in both check size and transaction volume.
Current consensus estimates on FactSet predict a modest same-store sales rise of 1.5%. Kirk Tanner, Wendy's Chief Executive Officer, expressed his excitement regarding upcoming innovations and collaborations aimed at enhancing their menu, which focuses on high-quality offerings made from fresh ingredients.
The company's strategy also includes significant investments in building new restaurants internationally and leveraging technology to enhance restaurant profitability, as noted by Chief Financial Officer Ken Cook. Wedbush's analyst, Nick Setyan, pointed out that a more cautious long-term guidance could have been a wiser approach, especially in light of Wendy's current valuation discount compared to its historical performance and franchised competitors.
While the renewed focus on core equities and operational improvements like customer service is commendable, the analysts caution that a diminished emphasis on perceived value may present challenges moving forward. The brokerage’s note conveyed growing concerns about the potential for heightened quarter-to-quarter sales volatility as the management team leans into partnerships and collaborations without adequately addressing value concerns, particularly impacting lower-income consumers. In terms of financial projections, Wendy's continues to expect adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to hover between $550 million and $560 million for this fiscal year.
The fast-food chain aims for an annual growth rate of 7% to 8% for this metric in the long run. Analysts at Wedbush see a promising 200-basis-point margin enhancement opportunity driven by productivity upgrades, menu mix strategies, and labor optimization, among other initiatives. Moreover, Wedbush maintains a neutral rating on Wendy's stock, reiterating a 12-month price target set at $16.
Given these dynamics and industry trends, the fast-food giant's path forward appears fraught with both opportunities and challenges..