Wendy's nosedives after slashing its profit outlook amid plans to expand its breakfast line nationwide

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Wendy's nosedives after slashing its profit outlook amid plans to expand its breakfast line nationwide

Wendy's singapore

Drew Fritz/Reuters

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  • Wendy's shares tanked after the restaurant chain announced it will invest $20 million to expand its breakfast line across all US locations.
  • The company's announcement led it to lower profit expectations for 2019. Wendy's now expects adjusted earnings per share to drop by 3.5% to 6.5%, after previously forecasting growth between 3.5% and 7%.
  • The chain expects to hire about 20,000 new employees as part of the expansion.
  • Watch Wendy's trade live here.

Wendy's shares plummeted as much as 9% in early Tuesday trading after the company revised its yearly profit expectations lower as it plans a nationwide release of its new breakfast line.

The Dublin, Ohio-based company already features its breakfast menu in 300 locations and now expects to roll out the offerings to all US restaurants by the end of 2020. Wendy's bid in the breakfast segment will cost about $20 million in upfront investment as it prepares its locations .

Regulatory filings show Wendy's had 5,810 locations in the US by the end of 2018. The Monday afternoon announcement noted the company and its franchisees expect to hire an additional 20,000 employees as part of the breakfast expansion. The chain's CEO Todd Penegor noted the expansion should bring "incredible growth opportunities" as it caters to a morning-focused fast food customer.

"We are well-positioned to pursue it. We believe we have the right team and structure in place, and we put Wendy's fan favorites on our breakfast menu to set us apart from the competition," Penegor said in a company statement.

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The restaurant chain expects adjusted earnings per share to drop by 3.5% to 6.5%, after previously estimating the metric to grow between 3.5% and 7%. Wendy's announced it will give an update on its 2020 objectives during its October 11 investor meeting.

Wendy's reiterated its previous estimates for general expenses, global sales growth, and adjusted tax rate.

The company's breakfast menu will offer breakfast-themed spins on popular Wendy's items. Future offerings include a Breakfast Baconator, Frosty-ccino, and Honey Butter Chicken Biscuit, according to the company's announcement.

The restaurant's shares closed at $21.95 per share Monday, up nearly 41% year-to-date.

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The company has 13 "buy" ratings, 14 "hold" ratings, and one "sell" rating from analysts, with a consensus price target of $21.35, according to Bloomberg data.

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