The wealthy investor has a reputation on Wall Street as a corporate striker who encourages companies to make drastic changes, such as restructuring, spin-offs or pursuing mergers or acquisitions to provide better value to investors.
Investor activists such as Peltz tend to intervene when they feel a company is undervalued, Feldman added. From their point of view, “the company can cost more if certain changes are made,” she said.
These investors typically seek to achieve one of three things: changes in management, operational improvements or adjustments to the scope of the business, such as getting rid of brands or moving to a new strategic space, Feldman said.
What’s up with Wendy?
In the first quarter, global sales at Wendy’s restaurants, which had been open for at least 15 months, rose 2.4 percent.
But sales growth in the first quarter was much stronger for Wendy’s competitors. McDonald’s said sales at its global restaurants, which have been open for at least 13 months, jumped 11.8 percent, while Burger King’s sales at locations open for at least a year rose 10.3 percent.
In a recent interview with analysts, Wendy’s executives said the first quarter’s results did not fully meet expectations.
“The first quarter, in terms of margins, did not go completely with the plan,” said Wendy CFO Gunther Plosch during an interview with an analyst in May. “We missed sales slightly,” he said, adding that “inflation in goods and labor was slightly higher than we expected.” Wendy’s also said the bad weather had a negative impact on the quarter.
But now, two years after the pandemic, breakfast is not enough to significantly increase Wendy’s numbers.
“The breakfast environment was undoubtedly challenging across the industry … which affected our expectations for year-round breakfast sales growth,” CEO Todd Penegor said during an interview with analysts in May. However, “we achieved solid results on breakfast day,” Penegor added, and Wendy’s increased its share of dining time compared to other fast food restaurants with burgers, he said.
The company’s first-quarter results fell short of Wall Street’s expectations, sending shares down when Wendy’s announced May 11, prompting some analysts to lower their target prices.
Wendy’s was supposed to have its investor day on June 9, but postponed the conference indefinitely, the company said last week, adding that it was reiterating its 2022 outlook.
“As can be seen from the momentum of our sales, which accelerated on a 2-year basis in the first quarter of 2022, we continue to make significant progress in our three pillars of long-term growth: building our daily breakfast, accelerating our digital business and expanding our footprint around the globe, “Penegor said in a statement.
“Our strong momentum, stable implementation of our strategic initiatives and improved margins of the company-run restaurants since we left the first quarter give us the confidence to reaffirm this full prospect for 2022,” he added. Wendy declined to comment on the story beyond what she said publicly.
If Peltz manages to make big changes in the burger chain, this will not be the first time.
Peltz’s activist story
“Wendy was struggling to find direction after its founder and spokesman, David Dave Thomas, who died,” the report said. In the years after Thomas’ death, a number of investors demanded change.
“The big shareholders have been urging private management to do something about the company’s fading image and poor marketing strategy,” the Times reported. “Sales in the same store – a key indicator of the efficiency of the retail industry – were steadily declining, as was its share price.
Peltz was one of those investors. He began campaigning for change in late December 2005, eventually becoming chairman.
“The board will carefully review any proposals submitted by Trian Partners,” Wendy said in a statement after Trian’s submission, adding that “we remain focused on achieving our vision of becoming the world’s most prosperous and beloved restaurant brand.”
For experts, Peltz’s involvement is far from shocking. In a note last week, Wedbush analyst Nick Setian said “we are not surprised by Peltz’s appetite”, adding that Trian “is no longer sitting aside”.