Wendy's (WEN) is ticking modestly higher today (+2%) after reporting Q1 results this morning. Adjusted EPS rose 27% yr/yr to $0.14, which was better than expected. Revenue rose 7.4% yr/yr to $408.6 mln, which also was better than expected. As a quick side note, WEN provides both GAAP revenue and adjusted revenue. GAAP revenue is what investors should be focusing on. In terms of guidance, WEN always guides on a full year basis only. The company reaffirmed 2019 EPS growth of +3.5-7.0% on its $0.59 EPS result in 2018. We compute the 2019E guidance as $0.61-0.63.
The key metric for investors is North America same-restaurant sales growth. This is similar to the same store comp number with retailers. It's closely followed by the market. In Q1, it came in at +1.3%, which was pretty good since it was an improvement from +0.2% in Q4, which was a bit weak. For all of 2018, the comp number was +0.9%, so 2019 is off to a better start.
As we mentioned in our preview, Wendy's has made accelerating this metric a key goal in 2019. To do this, WEN has been rolling out new food items, especially on its premium menu. In fact, WEN says it has made some of its most significant changes to its premium menu in more than a decade. Specifically, WEN launched the "Made To Crave" hamburger line in February and the $5 Giant JBC that ran in January.
Another menu addition, on the value side, was the March launch of the Biggy Bag promotion which includes a Bacon Double Stack, nuggets, small fries, and small drink for $5. CFO Gunther Plosch said Biggy Bag did better than expected in Q1 despite some unfavorable weather. WEN also wants a more consistent customer experience and it has been improving its consumer-facing digital capabilities.
Wendy's has also been bolstering its delivery footprint with DoorDash and SkipTheDishes. WEN has grown its delivery footprint to 60% coverage in North America and is expecting to grow this to 80% by the end of 2019. WEN has also begun rolling out mobile ordering capabilities, it should be activated across the US system by the end of 2019.
Overall, investors appear to be happy with the Q1 results. It's still early, but it seems Wendy's is slowly but surely making the changes it needs to make to get the stock back in an uptrend.