It Looks Like Wendy's 4 For $4 Promo Is Boosting Sales

• Wendys Co WEN shares are down 14 percent in the last six months, having declined steadily after hitting a high of $11.58 on May 21.
  Citi’s Gregory R Badishkanian maintained a Buy rating on the company, with a price target of $11.
• Wendy's 4 for $4 promotion has resulted in accelerating SSS, and the company has been added to Citi’s Focus List, Badishkanian said.

Analyst Gregory Badishkanian mentioned that Wendy’s same-store sales is likely to have accelerated by “at least several hundred basis points” after the company introduced the 4 for $4 promotion in October.

Although growth may moderate as the promotion continues, especially with a potential 2 for $2 value launch expected from McDonald's Corporation MCD, Wendy’s is still expected to record robust 4Q SSS of at least 4 percent, Badishkanian added.

Wendy's management has been focusing on value offerings through 2H15, after stating earlier in the year that the company's “price/value messaging needed refinement.”

Badishkanian commented, “While other QSR players are also increasing their focus on value, we believe that the recent strength of the 4 for $4 promotion will encourage WEN to continue to roll-out new value-based initiatives, which should drive sustained sales over the next few quarters.”

McDonald's reported improving trends in 3Q and indicated that its All Day Breakfast would accelerate SSS further in 4Q. The analyst added, however, that this would not come at the expense of Wendy’s. McDonald's may introduce a 2 for $2 promotion, which would have only a modest impact on Wendy’s.

“We are adding Wendy's to Citi’s Focus List as our analysis and conversations with industry participants suggest that the strong results for Wendy's 4 for $4 promotion have continued, leading to an uptick in transactions with little to no impact on average check,” Badishkanian noted.

He added that the promotion seemed to be driving “incremental visits through initial trial as well as improved repeat frequency.”