Wendy's Earnings: Digital Progress Encourages but Consumer Pressure Drives Sluggish Comp Growth

No-moat Wendy's reported decent first-quarter results against a tough backdrop, with digital sales soaring 30% annually and loyalty membership growing 40% to 6 million after a successful March Madness promotion. While online sales still comprise just 17% of total systemwide sales, progress is encouraging, and even incremental changes should help defend a restaurant economic model that has been challenged by surging inflation in commodity, labor, construction, and borrowing costs. Results were in line with our forecasts, and management maintained its full-year guidance, so we expect to lift our $20 fair value estimate by just a low-single-digit percentage, consistent with time value.