Fast-food chain Wendy’s (NASDAQ: WEN) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 1.7% year on year to $560.9 million. Its non-GAAP profit of $0.29 per share was 14% above analysts’ consensus estimates.

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StockStory’s Take

Wendy’s delivered second-quarter results that modestly topped Wall Street’s revenue and profit expectations, despite a year-over-year decline in sales. Management attributed weaker U.S. performance to shifting consumer behavior and a crowded promotional calendar, which complicated execution at the restaurant level. Interim CEO Ken Cook acknowledged the challenges, noting, “Our U.S. top line results and rest of year outlook are below the expectations we set at the beginning of the year as the consumer and competitive environment looks much different today than we anticipated.” Cook’s remarks reflected a more cautious and self-critical tone, with a focus on implementing operational changes to address the softer sales environment.

Looking to the remainder of the year, Wendy’s guidance reflects persistent headwinds in consumer demand and a more competitive fast-food landscape. Management’s updated strategy centers on simplifying marketing efforts, concentrating on core menu innovation in chicken and beverages, and leveraging new data analytics tools to better target value offerings. Cook emphasized the importance of franchisee partnership, stating, “By continuing to strengthen our franchise relationships, we will drive improved results and ultimately reach our full potential together as One Wendy’s.” Investments in technology, improved customer experience, and a streamlined promotional calendar are seen as essential to stabilizing the business and positioning it for long-term growth.

Key Insights from Management’s Remarks

Management pointed to several operational learnings and strategic pivots that shaped the quarter, including the impact of an overly complex promotional approach and the need for tighter franchisee alignment.

• Overly complex promotions: The “100 Days of Summer” campaign, which layered multiple deals and collaborations, created confusion among both customers and restaurant staff. Interim CEO Ken Cook explained that the volume of initiatives made effective execution difficult and diluted the brand’s core message.

• International segment momentum: While U.S. sales lagged, Wendy’s international business continued to post strong results, with double-digit systemwide sales growth in markets such as Japan and Mexico. This segment also saw improved profitability driven by local partnerships and menu localization.

• Digital and AI investments: Implementation of digital menu boards and the FreshAI ordering platform contributed to higher customer satisfaction and improved accuracy, especially in company-operated restaurants. Management cited a 25% rise in loyalty sales and increased digital conversion rates, underscoring the impact of technology on operational efficiency.

• Franchisee collaboration: Wendy’s leadership highlighted a deliberate push to forge stronger ties with franchisees, including sharing strategic changes before public announcements and collecting more granular restaurant-level performance data. Cook stated that moving from “good to great” partnership is key to unlocking system-wide value.

• Product innovation focus: After learning from the shortcomings of broad-based promotions, Wendy’s is narrowing its second-half priorities to chicken menu innovation—including the launch of new tenders and themed collaborations—and a revamped beverage lineup. These focused initiatives are designed to be easier for restaurants to execute and more compelling for customers.

Drivers of Future Performance

Wendy’s outlook is shaped by ongoing consumer uncertainty, a streamlined menu strategy, and increased investment in technology and franchisee support.

• Narrowed promotional focus: Management is shifting from broad, overlapping campaigns to targeted innovation in chicken offerings and beverages, including collaborations and new cold brew coffee products. This approach is intended to simplify execution and help clarify marketing messages for customers.

• Data-driven value targeting: The company is leveraging advanced analytics to better understand customer preferences and tailor value-based offers, especially through its digital app. Cook noted that this allows Wendy’s to “more effectively target customers with value, especially targeting the customers that will result in increased frequency.”

• Franchisee economics and technology: Upgraded data systems and expanded field teams are enabling Wendy’s to benchmark performance at the restaurant level and provide actionable insights for franchisees. Management believes these steps will support profitability, drive unit growth, and create a cumulative “flywheel” effect on frequency and sales.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) whether the streamlined promotional calendar and focused menu innovation produce measurable improvements in U.S. same-store sales, (2) the sustained momentum and profitability of international operations as new markets ramp, and (3) the effectiveness of technology-driven customer engagement, including digital sales mix and AI-powered ordering. The impact of franchisee engagement and operational improvements on system-wide performance will also be closely monitored.

Wendy's currently trades at $10.32, up from $9.97 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).

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