Wendy’s profit view squeezed by rising commodity costs, labor crunch

(Reuters) -Wendy’s Co on Wednesday projected annual profit below market estimates as a widespread labor shortage and rising costs of raw materials eat into the fast-food chain’s margins, sending its shares down 4% in premarket trading.

The company said it expected annual adjusted earnings between 79 cents and 80 cents per share, compared with analysts’ average estimate of 82 cents, according to Refinitiv.

A worker crunch in the United States has made it difficult for restaurants to ensure adequate staffing, forcing some to hike wages and others like Domino’s Pizza to cut store hours.

The industry has also reeled under a surge in prices of raw materials from chicken to edible oils and higher freight costs.

Wendy’s company-operated restaurant margin, a key measure of profitability, declined to 14.4% in the third quarter from 16.9% a year earlier.

Its U.S.-same store growth of 2.1% also fell short of expectations of 4.4% as rivals McDonald’s and Taco Bell parent Yum Brands launched new menu items and collaborated with celebrities to lure more customers.

But the Dublin, Ohio-based restaurant chain reported a 14.7% jump in same-store sales at its international restaurants, trouncing estimates of a 9.1% rise.

Wendy’s also increased its share buyback plan to $300 million, as part of which it would launch a $125 million share repurchase program in the current quarter.

Total revenue rose 4% to $470.3 million in the three months to Oct. 3. Wendy’s earned 19 cents per share on an adjusted basis, edging past estimates of 18 cents.

(Reporting by Deborah Sophia in Bengaluru; Editing by Arun Koyyur and Aditya Soni)

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