1 Reason to Still Avoid Wendy's Stock, Even Though It's 10% Below Its 52-Week High
Key Points
Wendy's stock has lost ground over the last several years.
The company has lost market share, and slipped to third place in the U.S.
The board of directors hired a new CEO earlier this year.
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Wendy's (NASDAQ: WEN) has been beset by challenges. You can see that in the stock's performance.
The shares trade about 10% below the 52-week high and have lost 57% over the last three years.
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That may tempt some value investors, but I urge you to resist buying Wendy's stock. There's also likely no acquisition coming to rescue shareholders, since the board of directors rejected Trian's buyout offer.
Image source: Getty Images.
That's because Wendy's has been losing market share in the fast-food segment. It's now in third place, having been surpassed by the resurgent Burger King, part of Restaurant Brands International. Both trail U.S. market leader McDonald's.
CEO Bob Wright has blamed the sluggish sales and market share loss on food quality, the value proposition, and customer service.
You can see that in the continued lagging sales. Same-store sales (comps) have declined for some time, including in the third quarter. Globally, comps dropped 5.2%, including 5.7% in the U.S. and 2.2% internationally. For the first nine months of the year, Wendy's comps have fallen 6.1%.
The board of directors hired Wright in May to fix these issues. His strategy, Dave's Way, is focused on growing customer traffic, gaining market share, and increasing restaurant profitability. Wright has emphasized offering quality food at value prices, marketing, focusing on the customer, enhancing the digital experience, and improving restaurant operations.
Ultimately, people have many choices about where to eat, particularly fast-food options. Clearly, they're finding Wendy's offerings lacking. It's tough to win back customers, and recent results haven't been encouraging. That's why I would avoid Wendy's stock.
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International and recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.
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