Wendy’s Co 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Wendy’s Company (The)

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Wendy’s Co. reported a slight increase in revenue but a decrease in net income for fiscal year 2024. The company is focused on digital growth and global expansion but faces challenges with commodity and labor costs.

ELI5:

Wendy’s made a bit more money overall, but their profits went down. They’re trying to grow by using technology and opening more restaurants around the world, but it’s getting more expensive to run their business.

Accession #:

0000030697-25-000003

Published on

March 16, 2025

Analyst Summary

Revenue increased by 3.0% to $2.25 billion in 2024.
Net Income decreased by 4.9% to $194.4 million in 2024.
Global Same-Restaurant Sales increased by 1.5% in 2024.
Company-Operated Restaurant Margin increased by 80 basis points to 15.4% in 2024.
Digital Sales increased to approximately 17.6% of global systemwide sales in 2024.
Gross Profit Margin increased by 2.4% to 65.1%.
Operating Profit Margin decreased by 5.7% to 16.5%.
Net Profit Margin decreased by 7.4% to 8.7%.
Return on Assets (ROA) remained flat at 3.9%.
Return on Equity (ROE) increased by 13.5% to 74.9%.
Basic EPS decreased by 3.1% to $0.95.
Diluted EPS decreased by 2.1% to $0.95.
Current Ratio decreased by 15.5% to 1.85.
Quick Ratio decreased by 15.7% to 1.83.
Cash Ratio decreased by 15.3% to 1.22.
Debt-to-Equity Ratio increased by 16.4% to 18.41.
Debt-to-Assets Ratio increased by 0.8% to 94.8%.
Interest Coverage Ratio decreased by 2.6% to 3.00.
Asset Turnover increased by 7.1% to 0.45.
Price-to-Earnings Ratio (P/E) is 16.01.
Price-to-Book Ratio (P/B) is 12.06.
Price-to-Sales Ratio (P/S) is 1.39.
Enterprise Value to EBITDA (EV/EBITDA) is 10.13.
Revenue Growth is 3.0%.
Net Income Growth is -5.0%.
EPS Growth is -3.1%.
Systemwide sales grew by 2.8%.
Global systemwide same-restaurant sales increased by 1.5%.
The total restaurant count remained flat at 7,240.

Opportunities and Risks

Opportunities include driving same-restaurant sales, accelerating digital growth, improving restaurant profitability, and driving global unit growth.
Risks include the impact of external factors such as commodity costs, labor costs, and competition.

Potential Implications

Stock Price

The company’s strategic shift towards a more franchise-heavy business model could impact future financial performance.

Wendy’s Co. (WEN) 10-K Filing Analysis – Fiscal Year 2024

Executive Summary

This report analyzes Wendy’s Co.’s 10-K filing for the fiscal year ended December 29, 2024. The analysis focuses on key financial performance indicators, strategic initiatives, risk factors, and overall financial health. While revenue increased slightly, net income decreased, raising concerns about profitability. The company’s strategic focus on digital growth and global expansion presents opportunities, but challenges remain in managing commodity costs, labor expenses, and competitive pressures. A neutral to slightly negative outlook is warranted, pending further evidence of improved profitability and successful execution of strategic initiatives.

Company Overview

Wendy’s is the second-largest quick-service restaurant company in the hamburger sandwich segment in the U.S. and the third-largest globally. As of December 29, 2024, it operated 7,240 restaurants across the U.S. and 31 foreign countries and U.S. territories. The company operates through a predominantly franchised model, with approximately 5% of restaurants being Company-operated.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights a strategic framework focused on fresh food, customer experience, and global expansion. Key opportunities include driving same-restaurant sales, accelerating digital growth, improving restaurant profitability, and driving global unit growth. The MD&A acknowledges the impact of external factors such as commodity costs, labor costs, and competition. The tone is cautiously optimistic, emphasizing strategic initiatives while acknowledging existing challenges.

Financial Statement Analysis

Key Ratios and Trends

Revenue: Increased by 3.0% to $2.25 billion in 2024.
Net Income: Decreased by 4.9% to $194.4 million in 2024.
Global Same-Restaurant Sales: Increased by 1.5% in 2024.
Company-Operated Restaurant Margin: Increased by 80 basis points to 15.4% in 2024.
Digital Sales: Increased to approximately 17.6% of global systemwide sales in 2024.

Visual Aids

Revenue Composition (2024):

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Financial Ratio and Metric Analysis

All calculations are based on the provided data. Industry comparisons are based on my general knowledge as a financial analyst and data that is publicly available. A specific source will be listed if used.

Profitability

Gross Profit Margin:
- Calculation: (Revenue – Cost of Sales) / Revenue = ($2,246.5 – $783.2) / $2,246.5 = 65.1%
- Trend: 2023 Gross Profit Margin: ($2,181.6 – $794.5) / $2,181.6 = 63.6%. Percentage Change: (65.1% – 63.6%) / 63.6% = 2.4% increase.
- Industry: The restaurant industry typically has gross profit margins ranging from 60% to 70%. Wendy’s falls within this range.
Operating Profit Margin:
- Calculation: Operating Profit / Revenue = $371.4 / $2,246.5 = 16.5%
- Trend: 2023 Operating Profit Margin: $382.0 / $2,181.6 = 17.5%. Percentage Change: (16.5% – 17.5%) / 17.5% = -5.7% decrease.
- Industry: The restaurant industry typically has operating profit margins ranging from 10% to 20%. Wendy’s falls within this range.
Net Profit Margin:
- Calculation: Net Income / Revenue = $194.4 / $2,246.5 = 8.7%
- Trend: 2023 Net Profit Margin: $204.4 / $2,181.6 = 9.4%. Percentage Change: (8.7% – 9.4%) / 9.4% = -7.4% decrease.
- Industry: The restaurant industry typically has net profit margins ranging from 5% to 15%. Wendy’s falls within this range.
Return on Assets (ROA):
- Calculation: Net Income / Total Assets = $194.4 / $5,034.8 = 3.9%
- Trend: 2023 ROA: $204.4 / $5,182.8 = 3.9%. Percentage Change: (3.9% – 3.9%) / 3.9% = 0%
- Industry: The restaurant industry typically has ROA ranging from 2% to 8%. Wendy’s falls within this range.
Return on Equity (ROE):
- Calculation: Net Income / Total Stockholders’ Equity = $194.4 / $259.4 = 74.9%
- Trend: 2023 ROE: $204.4 / $309.8 = 66.0%. Percentage Change: (74.9% – 66.0%) / 66.0% = 13.5% increase.
- Industry: The restaurant industry typically has ROE ranging from 10% to 25%. Wendy’s is significantly higher, which could indicate higher leverage or more efficient use of equity.
Earnings Per Share (EPS) – Basic and Diluted:
- Calculation: Basic EPS = $194.4 / 204.351 = $0.95, Diluted EPS = $194.4 / 205.614 = $0.95
- Trend: 2023 Basic EPS = $0.98, Diluted EPS = $0.97. Basic EPS Percentage Change: ($0.95 – $0.98) / $0.98 = -3.1% decrease. Diluted EPS Percentage Change: ($0.95 – $0.97) / $0.97 = -2.1% decrease.
- Industry: EPS varies widely based on company size, profitability, and share structure.

Liquidity

Current Ratio:
- Calculation: Current Assets / Current Liabilities = $736.1 / $397.6 = 1.85
- Trend: 2023 Current Ratio: $837.7 / $381.9 = 2.19. Percentage Change: (1.85 – 2.19) / 2.19 = -15.5% decrease.
- Industry: A current ratio of 1.5 to 2.0 is generally considered healthy for the restaurant industry. Wendy’s falls within this range.
Quick Ratio (Acid-Test Ratio):
- Calculation: (Current Assets – Inventory) / Current Liabilities = ($736.1 – $6.5) / $397.6 = 1.83
- Trend: 2023 Quick Ratio: ($837.7 – $6.7) / $381.9 = 2.17. Percentage Change: (1.83 – 2.17) / 2.17 = -15.7% decrease.
- Industry: A quick ratio of 1.0 or higher is generally considered healthy. Wendy’s is above this benchmark.
Cash Ratio:
- Calculation: (Cash and Cash Equivalents + Restricted Cash) / Current Liabilities = ($450.5 + $34.5) / $397.6 = 1.22
- Trend: 2023 Cash Ratio: ($516.0 + $35.8) / $381.9 = 1.44. Percentage Change: (1.22 – 1.44) / 1.44 = -15.3% decrease.
- Industry: A cash ratio above 0.5 is generally considered strong. Wendy’s is well above this benchmark.

Solvency/Leverage

Debt-to-Equity Ratio:
- Calculation: Total Liabilities / Total Stockholders’ Equity = $4,775.5 / $259.4 = 18.41
- Trend: 2023 Debt-to-Equity Ratio: $4,873.0 / $309.8 = 15.73. Percentage Change: (18.41 – 15.73) / 15.73 = 16.4% increase.
- Industry: The restaurant industry typically has debt-to-equity ratios ranging from 1.0 to 3.0. Wendy’s is significantly higher, indicating a high level of leverage.
Debt-to-Assets Ratio:
- Calculation: Total Liabilities / Total Assets = $4,775.5 / $5,034.8 = 94.8%
- Trend: 2023 Debt-to-Assets Ratio: $4,873.0 / $5,182.8 = 94.0%. Percentage Change: (94.8% – 94.0%) / 94.0% = 0.8% increase.
- Industry: The restaurant industry typically has debt-to-assets ratios ranging from 30% to 60%. Wendy’s is significantly higher, indicating a high level of debt financing.
Interest Coverage Ratio (Times Interest Earned):
- Calculation: Operating Profit / Interest Expense = $371.4 / $123.9 = 3.00
- Trend: 2023 Interest Coverage Ratio: $382.0 / $124.1 = 3.08. Percentage Change: (3.00 – 3.08) / 3.08 = -2.6% decrease.
- Industry: An interest coverage ratio of 2.0 or higher is generally considered healthy. Wendy’s is above this benchmark, but the margin is relatively thin given the high debt levels.

Activity/Efficiency

Asset Turnover:
- Calculation: Revenue / Total Assets = $2,246.5 / $5,034.8 = 0.45
- Trend: 2023 Asset Turnover: $2,181.6 / $5,182.8 = 0.42. Percentage Change: (0.45 – 0.42) / 0.42 = 7.1% increase.
- Industry: The restaurant industry typically has asset turnover ratios ranging from 0.5 to 1.5. Wendy’s is below this range, indicating that it may not be efficiently utilizing its assets to generate revenue.

Valuation

Price-to-Earnings Ratio (P/E):
- Calculation: Stock Price / EPS = $15.21 / $0.95 = 16.01
- Industry: The restaurant industry typically has P/E ratios ranging from 15 to 25. Wendy’s falls within this range.
Price-to-Book Ratio (P/B):
- Calculation: Market Cap / Book Value of Equity = (205.397 * $15.21) / $259.4 = 12.06
- Industry: P/B ratios vary widely.
Price-to-Sales Ratio (P/S):
- Calculation: Market Cap / Revenue = (205.397 * $15.21) / $2,246.5 = 1.39
- Industry: The restaurant industry typically has P/S ratios ranging from 0.5 to 2.0. Wendy’s falls within this range.
Enterprise Value to EBITDA (EV/EBITDA):
- Calculation: EV = Market Cap + Total Debt – Cash = (205.397 * $15.21) + $2,740.3 – $503.6 = $5,360.8. EBITDA = Operating profit + Depreciation and Amortization = $371.4 + $143.2 + $14.7 = $529.3. EV/EBITDA = $5,360.8 / $529.3 = 10.13
- Industry: The restaurant industry typically has EV/EBITDA ratios ranging from 8 to 15. Wendy’s falls within this range.

Growth Rates

Revenue Growth:
- Calculation: ($2,246.5 – $2,181.6) / $2,181.6 = 3.0%
Net Income Growth:
- Calculation: ($194.4 – $204.4) / $204.4 = -5.0%
EPS Growth:
- Calculation: ($0.95 – $0.98) / $0.98 = -3.1%

Other Relevant Metrics

Systemwide Sales Growth: Systemwide sales grew from $14,087.7 million in 2023 to $14,487.4 million in 2024, representing a 2.8% increase. This indicates continued growth in overall sales across both company-operated and franchised restaurants.
Same-Restaurant Sales Growth: Global systemwide same-restaurant sales increased by 1.5% in 2024, compared to 4.3% in 2023. This slowdown in same-restaurant sales growth suggests a potential moderation in consumer demand or increased competition.
Restaurant Count: The total restaurant count remained flat at 7,240 from the end of 2023 to the end of 2024. However, there were shifts within the restaurant portfolio, with a decrease in company-operated restaurants and an increase in franchised restaurants. This suggests a strategic shift towards a more franchise-heavy business model.

Commentary

Wendy’s financial performance in 2024 shows a mixed picture. While revenue increased, profitability metrics such as operating profit margin and net profit margin declined. The company maintains a high level of debt, which is reflected in its high debt-to-equity and debt-to-assets ratios. Despite these challenges, Wendy’s continues to generate positive cash flow from operations and maintain a solid interest coverage ratio. The company’s strategic shift towards a more franchise-heavy business model could impact future financial performance.