May 6, 2020 / 12:51 PM / 19 days ago

Where's the beef? Wendy's turns to chicken to prop up sales

(Reuters) - Wendy’s Co said on Wednesday it would focus on marketing its chicken products as it grapples with beef supply shortages in the United States that forced the burger chain to take its signature hamburgers off the menu at some of its restaurants.

The logo of Wendy's is on display in Tbilisi, Georgia, July 13, 2016. REUTERS/David Mdzinarishvili/File Photo

Shares of the company jumped 10% after Wendy said its new breakfast menu was doing well and expected current-quarter same-store sales to improve as coronavirus-led lockdowns ease in states, allowing the burger chain to open more U.S. stores.

The chain, known for its fresh-never-frozen burger patties and its iconic “Where’s the beef?” campaign, is one of the first to flag beef supply shortages as several U.S. meat processing plants halt work to curb the spread of the virus among its facility staff.

“It is tight out there today. We’re still delivering beef to every restaurant every 2 or 3 days. But from time to time, there could be some items that we’re out of stock,” Chief Executive Officer Todd Penegor told analysts.

“We do think it’s probably a couple of weeks of challenging tightness that we’ll have to work through.”

Stephens analyst James Rutherford in a note published on Tuesday said a study of online menus for Wendy’s locations showed that 18%, or more than 1,000 restaurants, were selling non-beef items.

Rivals Shake Shack Inc and McDonald’s Corp, however, said their supply chains remain strong, while retailers Costco Wholesale Corp and Kroger Co put limits on meat purchases.

Wendy’s said its first-quarter U.S. same-store sales were flat, largely helped by a boost in its recently launched breakfast category, which included versions of its popular burger Baconator and drink Frosties.

Its U.S. same-store sales in the week ended April 12 declined about 25% and were down just about 2.1% in the first week of May during the current quarter.

“We are impressed that the exit rate for April... and that in the most recent week comps across the U.S. system have returned almost to flat,” Rutherford said in a note.

Net income more than halved to $14.4 million, due to investments in the breakfast launch.

Excluding one-time items, the company earned 9 cents per share, a cent lower than Wall Street expectations, according to IBES data from Refinitiv.

The company lowered its dividend to 5 cents payable to shore up its finances to deal with the hit from the COVID-19 pandemic. For the first quarter, Wendy’s paid a dividend of 12 cents per share.

Reporting by Nivedita Balu in Bengaluru; Editing by Shinjini Ganguli

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