Will a Strategic Pivot to China Save Struggling Wendy's?
Key Points
Wendy's U.S. sales are falling sharply, down 7.8% in the first quarter of 2026.
International sales are a bright spot for Wendy's and grew 6% systemwide in the first quarter.
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Wendy's (NASDAQ: WEN) is hoping a strategic move into China will reignite the brand that has struggled mightily in the U.S. in recent years. The Dublin, Ohio-based burger chain announced its first-quarter results on May 8, and the numbers were not good.
Global sales fell 5.5% in the first quarter, largely driven by weak U.S. restaurant performance, which was down 7.8%. This is an acceleration of the brand's weakening sales performance compared to the same period last year.
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Wendy's has closed more than 200 locations in the U.S. in the past year. However bad it may be at home, Wendy's recently signed a new agreement with China to open up to 1,000 restaurants over the next decade. This is a bold move for the company, but it isn't unheard of, as competitors such as McDonald's and Starbucks already have established footprints in China.
Image source: Getty Images.
This is all part of an internal initiative called "Project Fresh," which will also focus on menu upgrades such as a spicy chicken sandwich.
The move to China should give Wendy's investors some hope. International sales have been a bright spot for the chain. Frankly, the company needed to make a bold move to right the ship, and this is the most promising pivot available.
Wendy's investors will still need to remain patient since this is a multiyear effort, but with the stock priced so low right now -- if you're bullish on more American burgers in China -- it could be a good time to buy and hold for a while. Wendy's stock is down more than 31% over the past 12 months and more than 63% over the past five years. Its trailing P/E ratio is only about 9.5. There's a long road ahead, but the future of Wendy's hinges on its success outside of the U.S.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool 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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