Coronavirus fallout hits Wendy’s after successful breakfast launch

Wendy's same-store sales are sinking as the coronavirus pandemic spreads across the U.S., knocking the edge off the company’s breakfast menu roll-out. Yahoo Finance’s Heidi Chung joins Zack Guzman with the details.

Video Transcript

ZACK GUZMAN: We're looking at Wendy's shares-- in the red, off by about 2% as they continue to grapple with the fact that they tried to roll out breakfast menu options and what might look like the worst possible time. Of course, they couldn't plan for it, but coronavirus causing problems on their breakfast innovation front. A lot of money was thrown at that. And I want to bring on Heidi Chung who's been digging into how the restaurant's been impacted by that. Heidi.

HEIDI CHUNG: Zack, it's truly unfortunate because you, Brian Cheung, and myself, we all taste tested those breakfast items. And we were actually pretty hopeful going into this launch because the items were actually pretty good. But Wendy's joining a long list of other corporations that are withdrawing their 2020 outlook, as well as its longer-term outlook.

Wendy's also drawing down $120 million under its revolving credit facility. So now, including the draw down, Wendy's has about $340 million of cash on hand. Now the company closed its dine-in portion of its restaurants, but drive-through is still open, and takeout and delivery are still available as well.

But it is truly unfortunate timing for Wendy's. That massive breakfast launch was just earlier this month. And Wendy's actually giving us some numbers when it comes to the damage. Same store sales were actually up approximately 4% through the first two months of the quarter, but sales were down 15% in the first week of March, and then the COVID-19 outbreak happened.

The most recent week ended March 22nd. Same store sales fell around 20%. Now the bright side here, though, is that drive-through and digital sales are doing quite well. Drive-through now currently accounts for about 90% of Wendy's total sales, up from about 65% to 70% previously.

And digital sales represents 4.3% of total sales, and that is up from 2.5% in 2019. Now an update on those store closures, total of 235 stores are temporarily closed. And that accounts for about 3.5% of Wendy's total stores.

Now they're also working with franchisees here to alleviate some of the pressures. Several initiatives in place, but the stock is down a 34% so far this year, Zack.