Wendy’s recently provided very useful consumer insight that helps shed light on whether we are headed into a recession.
Income Cohort Commentary
- While there was no noticeable consumer pushback from its menu price increases, Wendy’s started to grow traffic in the $75k+ income cohort, while losing traffic in the <$75k cohort during 4Q22. This is consistent with Walmart’s report & represents a change from the last few quarters when Wendy’s gained ground with the <$75k cohort.
- Even though the chain has very little new pricing planned for 2023 (which could help drive positive traffic), it is likely that a low single-digit price increase if needed would result in flattish traffic. In either case, this would represent a very strong sequential traffic improvement vs. 2022.
- Beyond 2023, low-single-digit comp growth guidance is based upon expectations that pricing levels will normalize lower. In turn, frequency from the lower-income demo should start to rebound as commodity inflation slows & real disposable income starts to increase.
- Notably, the Fed recently updated their economic forecasts, providing more hope that a consumer rebound is possible given an economy that remains in decent shape for now.