Wendy's Prepares for Q2 Earnings: Key Insights Revealed

Wendy's Company Prepares for Second-Quarter 2025 Earnings Report

The Wendy's Company is set to release its second-quarter 2025 financial results on August 8, before the market opens. In the most recent quarter, the company’s earnings met expectations as per the Zacks Consensus Estimate. However, the upcoming report is expected to reflect a challenging environment for the fast-food chain.

Q2 2025 Earnings and Revenue Estimates

For the current quarter, the Zacks Consensus Estimate projects earnings of 25 cents per share, representing a 7.4% decline from the same period last year. Revenue is expected to reach $555.5 million, down 2.7% compared to the previous year. These figures highlight the ongoing pressures facing the company, particularly in a landscape marked by shifting consumer behavior and economic uncertainty.

Key Factors Influencing WEN’s Q2 Performance

Several factors are likely to impact Wendy’s performance in the second quarter. Soft consumer demand, especially among lower-income households, has persisted since March and is expected to continue affecting sales. This demographic, which represents a significant portion of Wendy’s customer base, has reduced spending in the high single to low double-digit range.

Additionally, quick-service restaurant traffic remains below industry expectations. While the first quarter saw mid-single-digit declines, there are no signs of a rebound in early 2025. This trend, particularly in the breakfast segment, is expected to limit Wendy’s ability to drive meaningful revenue growth.

Menu Innovation and Strategic Initiatives

Despite these challenges, Wendy’s has taken steps to remain competitive. The company has introduced new initiatives, such as the “100 Days of Summer” campaign and Frosty collaborations. However, these programs were launched late in the quarter, meaning their full impact may not be felt until later in the year. As a result, they offer limited relief from the current headwinds.

According to internal models, total U.S. sales are projected to decline by 4.6% in the second quarter, while international sales are expected to grow by 9.3% year over year.

Margins and Cost Management

Wendy’s bottom line is anticipated to decline year over year due to commodity inflation and an uncertain macroeconomic environment. Total costs and expenses are expected to decrease by 1.5% to $464.2 million, but this reduction may not be enough to offset rising input costs.

Adjusted EBITDA is forecasted to fall by 2.4% to $139.7 million, with an adjusted EBITDA margin increasing slightly by 10 basis points to 25.2%. This marginal improvement is attributed to higher labor productivity, although it is partially offset by increased commodity costs and pay rate inflation.

Zacks Model and Earnings Outlook

The Zacks model does not currently predict an earnings beat for Wendy’s in the second quarter. The company lacks the combination of a positive Earnings ESP (Expected Surprise Percentage) and a strong Zacks Rank that would increase the likelihood of exceeding expectations.

WEN’s Earnings ESP stands at -0.10%, indicating a slight negative surprise. Its Zacks Rank is currently #4 (Sell), suggesting caution among analysts.

Stocks with Stronger Earnings Potential

Other companies within the Zacks Retail-Wholesale sector show more favorable prospects. For example:

• Dillard's (DDS) has an Earnings ESP of +23.90% and a Zacks Rank of 1 (Strong Buy). It is expected to see a 17.43% drop in earnings, but it has historically beaten estimates.
• Bath & Body Works, Inc. (BBWI) has an Earnings ESP of +5.07% and a Zacks Rank of 2 (Buy). Its earnings are expected to decline by 2.7%, but it has consistently exceeded expectations.
• Abercrombie & Fitch (ANF) has an Earnings ESP of +2.97% and a Zacks Rank of 3 (Hold). Despite a projected 9.6% earnings decline, it has managed to beat estimates in the past four quarters.

These stocks represent better opportunities for investors looking for positive earnings surprises in the current reporting cycle.