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Wendy's (WEN) is trading modestly lower after reporting Q2 results this morning. The burger chain missed slightly on EPS and a bit moreso on revenue. Even though it reaffirmed FY24 EPS, the guidance was disappointing.

• WEN lowered FY24 guidance for global systemwide sales to +3-5% from +5-6% (important: this is NOT comparable to consensus revenue which is total revenue). Also, WEN guides for global comps on the call. This morning, it lowered its FY24 outlook to +1-3% from +3-4%. WEN also lowered FY24 FCF guidance.
• Of note, this was the first full quarter for new CEO Kirk Tanner, who took the helm on February 5. He was a long time PepsiCo (PEP) executive and most recently served as CEO of North American Beverages at PepsiCo.
• Probably the key metric was same-restaurant comps. Global comps were +0.8% and US comps were +0.6%, roughly the same as Q1: +0.9%/+0.6%. International comps performed better at +2.5%, although WEN is much more US-centric than peers like McDonald's (MCD). Its international exposure is quite limited, although it has exposure to Canada and has its sights set on Europe. It re-entered the UK in 2021 and recently announced expansion plans in Ireland and Romania. WEN's goal is to develop hundreds of restaurants across Europe over the next decade, beginning in 2025.
• WEN said its Q2 performance was competitive in the US, with dollar and traffic share holding steady within the QSR burger category. This performance was driven by sales growth in the breakfast and late-night day parts. WEN said that consumers continue to seek value. Wendy's is the original when it comes to bundle value meal deals in QSR. In terms of MCD's recent $5 value meal, WEN says its Biggie Bag has long had traction, but it's a concern among franchisees.
• Speaking of breakfast, WEN stressed that this remains an incredibly important day part. It is highly profitable, and WEN has not yet reached its potential. However, it has now optimized the level of its investment in 2024 to allow it to extend breakfast advertising beyond 2025. WEN continues to expect that breakfast sales growth will outpace rest of day at Wendy's.

Overall, WEN did not talk about the consumer as much as MCD did on its call. However, investors were disappointed with the Q2 results and especially the guidance. Lowering full year comp guidance was probably the most troubling aspect. The good news is that WEN will be lapping easier comps in 2H24. Also, WEN expects the category to improve later in the year and it sees breakfast as a tailwind. Finally, WEN reiterated is commitment to its $0.25/sh dividend. That computes to a yield nearing 6%, which seems high to us. We actually think investors would respond favorably to a dividend cut to deploy that capital elsewhere.