Wendy's comparable sales miss as fewer diners eat out

Wed Aug 10, 2016 11:45am EDT
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By Gayathree Ganesan

(Reuters) - Burger chain Wendy's Co (WEN.O: Quote) reported lower-than-expected quarterly comparable sales on Wednesday as a fall in grocery prices encouraged more diners to eat at home, sending the company's shares down as much as 8 percent.

Food prices have been on the decline in 2016, according to the U.S. Department of Agriculture.

Poultry prices dropped 3.4 percent in June from a year earlier, while beef and veal prices fell 6.7 percent, helped by lower transportation costs due to a fall in oil prices and the strength of the dollar, which has made imports cheaper.

Egg prices, which peaked during the avian flu outbreak last year, were 26.9 percent cheaper.

Restaurants, however, have not to been able to pass on the full benefits as their labor costs have risen substantially due to increases in minimum wages.

Against this background, fast-food chains including McDonald's Corp (MCD.N: Quote), Dunkin' Brands Group Inc (DNKN.O: Quote) and Starbucks Corp (SBUX.O: Quote), as well Wendy's, posted disappointing same-restaurant sales for the quarter.

"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," Wendy's Chief Executive Todd Penegor said on a conference call with analysts.


A Wendy's Co restaurant is pictured in Monrovia, California November 4, 2015. REUTERS/Mario Anzuoni