Wendy's is struggling as low-income consumers cut back

Wendy's cut its sales outlook Friday, pointing to heightened competition and economic uncertainty weighing on its customer base.

Company executives discussed Wendy's challenges during a call with analysts Friday, following the release of its latest earnings report. Interim CEO Ken Cook said that in light of the current environment, the company now expects full-year global sales to decline between 3% and 5%, compared with previous projections of flat to down 2%.

Wendy's is coping with softer consumer demand in 2025, particularly among the lower-income customers that tend to frequent fast-food chains, Sara Senatore, a research analyst at Bank of America, told CBS MoneyWatch.

"The low-income consumer remains under pressure," she said.

Fast food chains like Wendy's are competing for the attention of low-income consumers who have pulled back on eating out over concerns about the economy. According to a May study from Bankrate, among households earning less than $50,000 per year, 44% say they expect to spend less on dining out this year than they did last year.

Cook, who stepped in as interim CEO after former Wendy's former CEO Kirk Tanner departed to lead the Hershey Company, cited a "a combination of dynamic consumer behavior and a more challenging competitive environment" during a Friday call with analysts to discuss the results.

While sales improved in May and June due to new Frosty offerings, "overall demand recovered more slowly than we expected," he added. The burger chain's sales slipped 1.8% to $3.7 billion in the second quarter compared with a year earlier, according to the company's earnings report.

Inflation-weary consumers who are skipping breakfast could signal this growing pressure, with Wendy's executives highlighting the trend.

"Breakfast continued to perform worse than rest of day in the second quarter, which makes sense when you look at what's happening from a consumer behavior perspective," Cook said. "When consumer uncertainty increases and consumers choose to eat another meal at home, breakfast is often the first place that they that they do that with."

Meanwhile, McDonald's, which last year saw a sales slowdown from low-income consumers, reversed that trend following its decision to expand its value menu. CEO Chris Kempczinski told analysts earlier in the week that value items — which include its $2.99 Snack Wrap — are bringing some consumers back to its stores even as fast food visits across the industry have slowed.

Senatore said Wendy's provides good values for price-conscious consumers, but added the chain may not be communicating that as effectively as its competitors. "McDonald's has done a good job of marketing value, and that is something that Wendy's acknowledged that they needed to do," she said.

Among other value offerings, is the Wendy's Biggie Bag, which features a junior bacon cheeseburger, small fries, four-piece chicken nuggets and a soft drink for $5.

Asked about adjusting core menu pricing during Friday's call, Cook said the company plans to use new data analytics capabilities to evaluate its prices.

"I think it's absolutely something that we'll look at," he said.

The Associated Press contributed to this report.

• Food & Drink
• McDonald's
• Inflation
• Wendy's