Wendy's sales hit by cheaper US grocery prices

Burger chain Wendy’s has reported lower-than-expected sales as more consumers decided to eat at home. Sales at stores open for at least 15 months rose by 0.4%. Analysts had expected 1.9% growth.

Lower food prices helped Wendy’s cut costs, but cheaper groceries were also encouraging more people to cook. Profits for the second quarter fell $13.7m to $26.5m (£20.3m) compared with the same period last year.

Total sales at Wendy’s restaurants fell 22% to $382.7m. Todd Penegor, the chain’s chief executive, said: “The most notable driver behind the sales slowdown appears to be the continued gap between cost of eating at home and cost of dining out, which is now at its widest point since the recession.”

The slide in sales at Wendy’s reflects broader problems in the fast food industry, which is increasingly regarded by consumers as unhealthy. McDonald’s, Dunkin’ Donuts and Starbucks have all posted lower sales in recent quarters. 

‘Fast casual’ competition

New competitors in the fast food market and consumers’ growing desire for healthier options have also caused problems for many in the industry. When people do eat out they are increasing turning to “fast casual” chains that offer a more upmarket experience.

Stephen Dutton, consumer foodservice analyst at Euromonitor, said: “Consumers have a little more disposable income and they are willing to trade up for more premium option, which has driven a demand for new players like Shake Shack and Chipotle.”

Newer operators such as Shake Shack and bakery chain Panera are offering what many customers regard as a better choice, despite their higher prices. Shake Shack reports earning after markets close on Wednesday.

Fast food restaurants are also feeling pressure from increases in the minimum wage which have been introduced in several US cities. A growing number of chains are trying out new menu items and discounts in a bid to attract customers.