Wendy's $WEN beat Wall Street's first-quarter earnings and revenue expectations on Friday, but U.S. same-restaurant sales continued to deteriorate, falling 7.8% as the company described itself as being in the early stages of a turnaround.
Adjusted earnings per share came in at $0.12 for the quarter ended March 29. Analysts had projected $0.10 per share, according to The Wall Street Journal. Revenue rose 3.3% to $540.6 million. Analysts had forecast $518.03 million, according to The Wall Street Journal.
Premarket trading saw Wendy's shares rise roughly 4.3% following the release of the results.
Behind the top-line improvement were franchise fee increases connected to a system-optimization initiative, a lift in advertising funds revenue, and a bump in company-operated restaurant sales that reflected the franchise locations Wendy's brought in-house during the third quarter of 2025, the company said. Those gains were offset by lower franchise royalty revenue.
Despite the revenue growth, several financial metrics worsened year over year. Net income fell to $22.7 million from $39.2 million in the same quarter a year earlier. Adjusted EBITDA declined 10.6% to $111.3 million. At U.S. company-operated locations, the restaurant margin narrowed by 340 basis points to 11.4%, as falling customer traffic, rising commodity costs, and higher labor expenses all weighed on the result, the company said.
Global systemwide sales fell 5.5% to $3.2 billion. International systemwide sales provided a measure of relief, growing 6.0% in the quarter. International same-restaurant sales edged down just 0.4%, compared with the 7.8% drop in the U.S.
A newly signed franchise agreement calls for as many as 1,000 Wendy's locations to be built across China over a decade. Globally, the quarter ended with 50 net new restaurant openings, while the domestic market absorbed a net loss of 164 locations.
"While our first quarter results reflect a business in the early stages of a turnaround, we are making progress to improve our U.S. business and are confident in the direction we are heading," interim CEO Ken Cook said in a statement.
For the full year 2026, Wendy's left its guidance unchanged, calling for adjusted EPS in the range of $0.56 to $0.60, adjusted EBITDA between $460 million and $480 million, and global systemwide sales roughly in line with the prior year. The company also declared a quarterly dividend of $0.14 per share, payable June 15 to shareholders of record as of June 1.
The results come as Wendy's rival Restaurant Brands $QSR International reported that its Burger King U.S. business posted a 5.8% same-store sales gain in the first quarter, with CEO Josh Kobza crediting a multi-year renovation and investment program for outperforming expectations.