Wendy’s/Arby’s Group plans to implement “prudent” and “strategic” price increasesPosted: May 11, 2011
Even fast food restaurants have determined that the market can accept some price hikes. In its latest earnings report, Wendy’s/Arby’s Group (WEN) provided an outlook that includes plans to implement “prudent” and “strategic” price increases to at least partially offset rising commodity prices, especially in beef (emphasis mine):
“We expect to generate strong sales growth at Wendy’s for the remainder of the year driven by exciting new product introductions, including hamburgers, chicken and salads, in addition to strategic price increases…Margins will be negatively impacted by increases in commodity costs primarily driven by unprecedented beef prices that are affecting the restaurant industry. We have reaffirmed our same-store sales outlook and expect to offset some of these commodity increases with prudent price increases, while protecting transactions and market share…”
WEN expects improved sales trends through the rest of the year, and this must help give them the confidence to raise prices.
The company’s confidence really shines through as management discusses future prospects further in light of higher commodity costs:
“Although we have revised our outlook for the year to reflect higher expected commodity costs, we continue to make significant strategic progress improving our core menu offerings including breakfast. We are also pleased with our progress developing Wendy’s international business, which represents a significant opportunity. The Arby’s turnaround is progressing nicely and we plan to resume our stock buyback program after the conclusion of the strategic alternatives process, subject to market conditions. As we’ve said before, 2011 is a transition year and we are confident that the investments we are making will position Wendy’s for 10% to 15% average annual EBITDA growth in 2012 and beyond…”
Disclosure: author owns WEN