Wendy's Accelerates U.S. Store Closures, Confirming Turnaround Strain

What happened

Wendy's has announced plans to close up to 350 U.S. locations in the first half of this year, as reported by Business Insider, highlighting ongoing struggles with declining sales. This move aligns with the Project Fresh turnaround initiative detailed in recent filings, which aims to optimize the footprint by shuttering underperforming stores. U.S. same-restaurant sales have worsened sequentially, from -2.8% in Q1 2025 to -4.7% in Q3 2025, reflecting persistent traffic and value pressures amid competitive headwinds. Despite international growth providing a partial cushion, the company's high leverage at 6.6x net debt to EBITDA and thin interest coverage of 2.97x constrain financial flexibility. Management's aggressive closure strategy underscores the depth of the U.S. downturn but also raises execution risks, including potential franchisee distress and near-term earnings drag from impairment charges.

Implication

The accelerated closures indicate management is prioritizing footprint rationalization over growth, likely incurring short-term costs that could pressure already weakened earnings. With U.S. comps still negative, these actions may not suffice to restore profitability if underlying demand fails to rebound, threatening the turnaround's success. High leverage and limited balance-sheet cushion amplify the risks, making the capital-intensive Project Fresh a high-stakes gamble in a tough competitive environment. International expansion offers some offset but remains too small to fully neutralize U.S. weakness, keeping overall growth muted and dependent on flawless execution. Investors should await upcoming quarterly results for signs of comp improvement or further guidance cuts before considering an entry, as the stock's 'WAIT' rating suggests downside persists.

Thesis delta

The news reinforces the existing bearish thesis by confirming that planned store closures are proceeding on an aggressive timeline, which was already a key risk in the master report. It underscores the urgency of Wendy's turnaround but does not alter the core view that U.S. comp stabilization is necessary for any upside. However, the scale and timing may heighten execution risks, potentially accelerating downside scenarios if sales fail to improve or franchisee distress materializes.