Earnings Call Transcript - WEN Q2 2024

Operator, Operator

Good morning. Welcome to the Wendy's Company Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. You may begin your conference. Thank you, and good morning, everyone. Today's conference call and webcast includes a PowerPoint presentation, which is available on our Investor Relations website, irwendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of our earnings release. This disclosure reminds investors that certain information we may discuss today is forward-looking. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements. Also, some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in our earnings release. On our conference call today, our President and Chief Executive Officer; Kirk Tanner, will give a business update and our Chief Financial Officer, Gunther Plosch, will review our second quarter results and share our financial outlook. From there, we will open up the line for questions. With that, I will hand things over to Kirk.

Kirk Tanner, CEO

Thanks, Nick. Good morning, everyone. During the second quarter, our restaurants across the globe continued to deliver system-wide and same-restaurant sales growth, reaching 2.6% and 0.8%, respectively. Our performance was competitive in the U.S. with our dollar and traffic share holding steady with the QSR burger category during the quarter. This performance was driven by sales growth at the breakfast and late-night dayparts and our focus on surrounding our customers with their Wendy's favorites, exciting innovation, and compelling value done the Wendy's way with fresh, high-quality ingredients. The International segment delivered another quarter of strong system-wide sales growth reaching over 8%, driven by continued same-restaurant sales growth and net unit growth across each region. Turning to our digital business. Everything we are doing in this space is with the goal of creating and building loyalty and personalized experiences for our customers. Our digital business continues to perform well, and we've made really good progress. We grew global digital sales by over 40% year-over-year in the second quarter, delivering 17% global digital sales mix. Global digital sales growth was driven by the U.S. segment, which grew sales dollars over 40% year-over-year and international, which grew over 30% year-over-year. Our focus on driving sales through our Wendy's app and loyalty platform continues to be successful, and our loyalty business is now almost as big as our third-party delivery business. You will see us continue to focus on improving the experience for customers. We are confident that this will drive loyalty even further and create more growth for the brand in the years to come. Finally, our Q2 development progress achieved our expectations. We have now opened 99 brand-new Wendy's restaurants through Q2, a more than 20% increase versus the first half of 2023. Looking ahead, the team has made meaningful progress towards solidifying our sales growth plan for the second half of 2024 and setting us up for unit growth acceleration in 2025 and beyond, driving our confidence in delivering strong results over the near- and long-term. Before diving into our year-to-go plans, I'd like to briefly touch on the leadership and structural changes that we recently announced. With the elevation of Abigail Pringle and E.J. Wunsch to the roles of President, U.S. and President International, we now have a structure that drives focus and clear accountability for accelerated unit growth and operational performance in both segments. This evolution also provides one voice for the franchisees in each segment, streamlining our communication and enhancing our engagement. I am confident this change will accelerate progress across our strategic focus areas, including franchise profitability, unit growth, customer satisfaction, and executional excellence. Now let's turn to our plans to drive growth during the rest of the year and beyond. We are leaning in even further across the growth pillars to drive sales while expanding restaurant margin. Our balanced approach focuses on elevating our craveable core menu, delivering impactful innovation, and offering relevant value. We believe we are in a position of strength, offering menu items that deliver across this spectrum. When it comes to our craveable menu, our fresh, never frozen beef, fresh produce, and full optimization of every sandwich on the menu are key differentiators for us. We will continue to capitalize on opportunities to drive impactful innovation. In the second quarter, we launched Triple Berry Frosty and Saucy Nuggs, both resonating with consumers. And you can expect to see a continuous stream of innovation from us in the second half of the year. As it relates to value, consumers continue to seek relevant value. Wendy's is the original when it comes to bundled value meal deals in QSR, and you'll see us continue to lean into this competitive advantage. Breakfast remains an incredibly important daypart. It is highly profitable, and we have not yet reached our potential. We continue to outperform competitors by driving breakfast dollar growth ahead of the category in the second quarter. We have now optimized the level of our investment in 2024 to allow us to extend our existing breakfast advertising investment horizon beyond 2025. We continue to expect that breakfast sales growth will outpace the rest of the day at Wendy's, and those sales continue to be accretive to overall restaurant margin for the Company and franchisees. Turning to our overall sales outlook. As we assess the current consumer and category, we now expect to deliver global same-restaurant sales growth of 1% to 3% for the full year. Now let's turn to the great momentum we've built towards achieving our development goals. The team has made great progress solidifying our new restaurant pipeline as we continue our mission to bring more Wendy's to more fans across the globe. We remain on track to deliver global new restaurant openings of 250 to 300 units, providing a strong foundation to accelerate from in 2025 and beyond. Additionally, I am pleased to share that we have added more than 250 global new restaurant commitments year-to-date. Our European expansion is accelerating; we recently announced that the brand will enter the Republic of Ireland and Romania with strong franchisees who will begin opening restaurants in 2025. Ireland is a natural expansion of our current footprint, and we intend for Romania to act as an anchor for further expansion across other areas of Europe. These new development agreements layer on top of an additional increase in our U.K. franchise commitments, all supporting our plans to build hundreds of restaurants on the European continent in the coming years. Now turning to New Zealand. We recently shared that the Flynn Group has acquired the current New Zealand restaurants with plans to further expand the market in addition to their existing development agreement for 200 restaurants in Australia through 2034. The Flynn Group continues to be an outstanding operator, and we are confident in our ability to grow these high-potential markets, beginning with new restaurants in Australia in 2025. In Asia, our franchisee in India has increased our development commitment with a mix of both traditional locations and delivery kitchens. This will build upon our current footprint of 150 open restaurants. Finally, in Canada, we have finalized a new agreement in Quebec with plans to double our footprint in the province this year. We have also recently announced an enhanced incentive program to appeal to franchisees of all sizes and increase the reach of our new restaurant development program. We expect that these incentives, along with our continued focus on expanding restaurant margin and improving profitability will boost new build returns and further build out our long-term restaurant pipeline. As a result of the team's work, 100% of our new build goals through 2025 are tied to development commitments, which is up from 90% we previously disclosed. We are well on our way towards rapid expansion over the long term. I'll now turn it over to Gunther to share our second quarter financial results.

Gunther Plosch, CFO

Thanks, Kirk. In the second quarter, our global same-restaurant sales grew 2.6%, 9.5% on a two-year basis, supported by global same-restaurant sales growth across both our U.S. and international segments and continued global net unit growth. Our U.S. company restaurant margin reached 16.5%, decreasing 80 basis points year-over-year. This was primarily due to an increase in labor costs driven by rate inflation and customer account declines, partially offset by the benefit of a higher average check. The decrease in G&A was primarily driven by a decrease in incentive compensation and lower outside professional services as we mitigated implementation costs for the Company's human capital management system from the prior year. These were partially offset by an increase in employee compensation and benefits. Adjusted EBITDA decreased 1% to approximately $143 million, primarily due to an increase in the Company's incremental investment in breakfast advertising spending and the decrease in U.S. company-operated restaurant margin, partially offset by higher franchise royalty revenue and lower general and administrative expenses. The decrease in adjusted earnings per share was driven by lower adjusted EBITDA and increasing depreciation and higher cloud computing amortization costs. These were partially offset by fewer shares outstanding as a result of the Company's share repurchase program and lapping a decrease in investment income in the prior year. Finally, the decrease in free cash flow resulted from an increase in the Company's incremental investment in breakfast advertising and an increase in capital expenditures. These were partially offset by a decrease in cash paid for cloud computing costs. Now let's turn to our expectations for 2024. After flowing through our year-to-date results and refining our category forecast for the remainder of the year in the United States, we now expect full-year global system-wide sales growth of 3% to 5%, made up of 1% to 3% same-restaurant sales growth and 2% global net unit growth. Our adjusted EBITDA outlook of $535 million to $545 million remains unchanged. The impact of our updated system-wide sales outlook is offset by lower expected G&A of $255 million to $265 million, primarily driven by lower expected incentive compensation and optimization of our investment in breakfast advertising as we now plan to spend approximately $22 million this year. As a result of the updated system-wide sales outlook, we have now widened our U.S. company-operated restaurant margin expectations to 15% to 17%. We are reaffirming our outlook for adjusted EPS of $0.98 to $1.02 and capital expenditures of $90 million to $100 million. Finally, we now expect free cash flow of $275 million to $285 million, driven by the impact of our updated system-wide sales outlook. To close, I'd like to highlight our capital allocation policy, which remains unchanged. Our first priority remains investing in profitable growth, and our continued investments across our growth pillars showcase exactly that. Secondly, we are committed to sustaining an attractive dividend. We announced today the declaration of our third quarter dividend of $0.25 per share and continue to expect a full-year dividend of $1 per share in 2024. Lastly, our capital allocation policy gives us the flexibility to utilize excess cash to repurchase shares and reduce debt. Year-to-date, through July 25, we have repurchased approximately 2.9 million shares and have approximately $260 million remaining on our $500 million share repurchase authorization expiring in February of 2027. Due to current share price levels, we now expect share repurchases in 2024 of approximately $75 million. We are fully committed to delivering our simple, yet powerful formula. We are an efficient growth company that is driving strong system-wide sales growth against a backdrop of positive same-restaurant sales and expanding our global footprint. This is translating into significant free cash flows, which supports meaningful return of cash to shareholders through an attractive dividend and share repurchases. With that, I will hand things over to Kelsey to share our upcoming IR calendar.

Kelsey Freed, Investor Relations

Thanks, Gunther. To start things off, we will hold an investor call hosted by Bernstein on August 27. On September 12, we will attend the JPMorgan Conference in Miami. We'll then head to Canada for an MDR with Stifel in Toronto on September 24. If you're interested in joining us at any of these events, please contact the respective sell-side analyst or equity sales contact at the host firm. Lastly, we plan to report our third-quarter earnings and host the conference call on the same day on October 31. As we transition into our Q&A section, I wanted to remind everyone that due to the high number of covering analysts, we'll be limiting everyone to one question only. With that, we're ready to take your questions.

Operator, Operator

Thank you. Our first question for today comes from Jeffrey Bernstein of Barclays. Please go ahead.

Jeffrey Bernstein, Analyst

Great. I just had a question on the U.S. comp trends kind of in two parts, I guess. The first part is just you mentioned the quick service category discounting. And I know you talked about your $5 Biggie Bag. Just wondering if you could talk about any change in consumer behavior you've seen. I'm assuming the mix of that has gone up and how you differentiate when it seems like everyone has a very similar $5 offer? And a follow-up was just on the franchisee feedback from those conversations. I'm sure the conversations have been active with, I know, some pushback in terms of making sure everything is profitable, but just wondering how the conversations are going with franchisees as you talk about being more aggressive from the value side of things?

Kirk Tanner, CEO

Yes. Jeffrey, this is Kirk. I appreciate the question; it's very relevant right now, of course. Yes, look, the first thing I would point to is, we've got this nationally recognized famous platform called Biggie Bag that we've had on the menu prior to others coming in and doing something similar on the menu. So, we have traction with that value proposition that's relevant. Our franchisees are certainly on board with that. And of course, that is a concern for everyone. But our franchisees are on board. They help build this platform over the years. This has been a very effective tool. And it is in line with the rest of the things that we offer on our menu. We're very focused on three things: delivering our core, having exciting innovation that drives traffic and relevant value. The balance of our portfolio and our menu allows us to work really hard in times like we're in. And we're really excited about the traction that we have and the balance that we have across our menu.

Operator, Operator

Our next question comes from Brian Bittner of Oppenheimer. Your line is now open. Please go ahead.

Brian Bittner, Analyst

I just wanted to ask a question about your updated same-store sales guidance for 2024. It's now 1% to 3%. And I think the math suggests that this assumes a kind of 2% to 5% comp range in the second half of the year, which is obviously a meaningful acceleration from where your trends have been in the last couple of quarters. I know you're expecting to stimulate some breakfast growth, but is the easy comparisons a big enough factor to drive this acceleration that you're baking into the outlook? Or what does drive your confidence that the second half can showcase this acceleration?

Gunther Plosch, CFO

Good morning, Brian. Yes, we are confident with our 1% to 3% guidance range. Clearly, easier comparison is one part of the story. The second part of the story is that we definitely expect that the category is going to slightly improve in the back half. And thirdly, we're confident in the programming we have out there. As Kirk just said, our program is focused on showcasing our core and all the goodness we have in there, plus you will see a meaningful stream of innovation in the second half. Our nationally recognized Biggie platform and our digital offerings and acquisition strategies, the combination of all three will, as you point out, drive a slight acceleration on a one-year basis. If you look on a two-year basis, it's actually very, very comparable.

Operator, Operator

Our next question comes from John Ivankoe from JPMorgan. Your line is now open. Please go ahead.

John Ivankoe, Analyst

I apologize for the confusion. I'm not sure what went wrong. Hopefully, the number I have is accurate, so please let me know if it’s not. Your prime cost, which includes food, paper, and labor, is currently at 63%. This is generally acceptable in the industry, where companies aim for around 60% or even lower, especially given the negative traffic. My question is not only about unit development but also about how we view the overall system in the U.S. over the next few years, particularly regarding rent renewals for properties nearing the end of their 20-year term. How do we feel about the overall capacity in the U.S.? The economics suggest that keeping stores open makes sense, but sometimes, pursuing that option depends on the landlord rather than the tenant. I'd like to understand our thoughts about net unit count in this critical market, not just looking at 2025 but also the following years.

Gunther Plosch, CFO

Yes, we are very confident and bullish about the U.S. market. We are highly underpenetrated. We have a lot of interest from U.S. franchisees to continue to expand. We announced that in the first half, we added about 250 development agreements. It was a good amount in international, but that's also additions in the United States. As you might have also picked up, I think, two weeks ago, we issued a new FDD. And in the new FDD, we launched an optimized incentive program. Our commitment to keep working on the restaurant economic model plus the incentives that are out there, making the decisions for franchisees to build much, much easier. So, we think we have not reached our potential in the United States. We're helping with incentives that we just launched and continue the incentive program around build to see then feel confident that the contribution of the U.S. market to the overall unit growth, which is about 30%, is very feasible for us.

Operator, Operator

Our next question comes from Alex Slagle of Jefferies. Your line is now open. Please go ahead.

Alex Slagle, Analyst

All right. I guess to follow up on that, of Canada, your biggest international market, and you talked to the new commitments and plans for accelerated growth in Quebec. And I know the profitability and economics there have improved significantly versus 2019. So, curious if you think there could be even greater opportunity to expand that development beyond just Quebec, maybe look at Ontario, Alberta; perhaps you feel pretty well penetrated at this point, but curious if you think there's greater opportunity there.

Gunther Plosch, CFO

Yes, Alex. We're very excited about the Canadian market. We have a very engaged franchise base. As you pointed out, they're making great progress on sales and profits, right back in 2023. They grew sales by 9%, and the system was up in profit by about 25%. So obviously, a great economic environment. We definitely expect that Canada on its own is going to double their growth rates. Very attractive AUVs, therefore, the economics are also very good. So, we are excited about that, combined, obviously, with all the other international markets that we continue to highlight. But yes, there is definitely a lot of growth to be had.

Operator, Operator

Our next question comes from Eric Gonzalez of KeyBanc. Your line is now open. Please go ahead.

Eric Gonzalez, Analyst

Maybe if you could talk about how same-store sales trended throughout the quarter? I know it's not something you typically do, but there are a lot of competitive costs during the quarter, and I suspect the month-to-month trends were a little bit lumpy. So maybe it could be helpful if you could explain how the quarter unfolded and some of the things that were done to lift sales when trends softened. And while we're at it, could you tell us about the exit rate in June or how you fared in July? It would be very helpful.

Kirk Tanner, CEO

Yes, the sales over the quarter, there was some ebb and flow overall, but pretty consistent. I would just say if you look at our business, we continue to compete extremely well in this environment. We talked about holding share and the proposition that we have for consumers on our balance across value, our core business innovation. I think that kept our business fairly steady through that cycle that we just went through. That's critically important. The other thing that I think is helping us is our digital performance. We're continuing to lean into our digital. We added about 6% more loyal users to our platform, our loyalty platform, taking us to $42 million, which I think also is really important as we build a personal relationship with our customers.

Operator, Operator

Our next question comes from Andrew Strelzik of BMO Capital Markets. Your line is now open. Please go ahead.

Jared Hludzinski, Analyst

This is Jared Hludzinski on for Andrew Strelzik. I was hoping you could walk us through the drivers behind the updated 2024 U.S. company margin guidance? And if you could also provide us with an update on food costs and your visibility there as we look out to the balance of the year?

Gunther Plosch, CFO

Yes, on the restaurant margin, we've obviously widened the guidance range for sales. We consequently also widened the range for company restaurant margin to 15% to 17%. So, the midpoint is about 16%. As you might have seen, our year-to-date margin is also 16%. We are expecting flat commodities for the year. Labor inflation, that's unchanged, labor inflation in the 3% to 5% range. That's also unchanged. We definitely expect that with the slight acceleration of sales lift in the second half, plus a small price action we took at the end of the second quarter, all of that gets us very comfortably into the guidance range we have just issued. The picture on commodities hasn't really changed. Beef and fries are inflationary for us. Chicken is deflationary. We obviously made no progress in the last quarter to lock down price visibility on the commodity basket. We are slightly north of 90% locked down, comparable to the visibility we had last year at this time.

Operator, Operator

Our next question comes from Dennis Geiger of UBS. Your line is now open. Please go ahead.

Dennis Geiger, Analyst

Could you elaborate on breakfast performance for the quarter? It appears that the advertising, promotions, and innovations have been well-received. I'm interested in any additional insights you have about the breakfast customer and how that might influence your growth objectives for breakfast moving forward.

Kirk Tanner, CEO

Yes, breakfast is a significant opportunity for us. We have previously discussed this as reaching our full potential, and we believe we're about halfway there, which is encouraging. It is currently a positive driver for our business. Its growth rate outpaces both our overall business and the category as a whole. We are capturing more market share during this meal period. We plan to continue investing in breakfast through 2025 and beyond. What I really appreciate about breakfast is that it is more profitable and adds incremental value to our business. It effectively utilizes the restaurant's labor model, and our menu is strong. Therefore, we remain committed to focusing on this aspect, building momentum, and leveraging it to enhance our overall SRS performance.

Operator, Operator

Our next question comes from Danilo Gargiulo of Bernstein. Your line is now open. Please go ahead.

Danilo Gargiulo, Analyst

Gunther, I wonder if you can give us a little bit more context on the development centers that you have enhanced. Specifically, your expectations on the cash-on-cash returns on an unlevered basis that you're expecting franchisees to be getting out of it? And if you can also put that into context versus the other programs that you're running and their utilization rates.

Gunther Plosch, CFO

Yes, we are happy with the incentive programs we have just launched. So, remember, you've heard us talk about build-to-suit and about the pacesetter. The pacesetter actually has expired and is one of the driving forces for the additional development commitments that got signed. So, we worked in the last couple of months with the franchise community in terms of renewing the incentive program. It's a little bit different now. It's a tiered system. The basic idea is the more you commit from a building point of view, the higher an incentive you're going to get; it's obviously a win-win. We have to deal with fewer builders that are building more per franchise unit, and the franchisees that want to build more obviously get rewarded for a bigger incentive. I'm not looking that much on cash-on-cash returns. I look at levered payback periods. The build-to-suit program, which is unchanged from a design point of view, is still our best program. The levered payback on that is about two years. The top builder, which is our richest incentive, in exchange, you need to sign up for about 15 units; you get a levered return of about 3.5 years. So very, very attractive. The franchise community that we worked the program with was very excited, and we're confident that as we're rolling this out, that we'll get the franchise base excited and sign up for development agreements. I'm sure we are going to give an update on the sign-ups on these programs in the next couple of quarters.

Operator, Operator

Our next question comes from Jon Tower of Citi. Your line is now open. Please go ahead.

Jon Tower, Analyst

Just maybe circling back to the breakfast conversation, Kirk, I think you had mentioned in your prepared remarks, this year, you're only going to be spending about $22 million in breakfast spend or incremental spend from the Company contribution side. I think it was closer to $27 million previously. Maybe I'm mistaken, but you also made some comments about extending it potentially beyond $25 million. So, are you contemplating incremental investment above that $55 million you had originally outlined earlier this year?

Kirk Tanner, CEO

Thank you for the question, John. To clarify, we remain very optimistic about breakfast. We believe it's important to consider a longer investment horizon than we initially communicated. We expect to allocate some of that investment beyond $25 million. We see this as a gradual build over time. Our potential is approximately $3,000 a week per restaurant over the extended period. We will be careful in our approach, and it's sensible to increase that investment beyond $25 million. We plan to continue developing it further.

Operator, Operator

Our next question comes from Gregory Francfort of Guggenheim Partners. Your line is now open. Please go ahead.

Gregory Francfort, Analyst

Kirk, I think in the prepared remarks, you made a comment about increasing the pace of innovation. Can you maybe help frame up, obviously, without tipping your hand too much, what that's going to look like? Is that just going to be shorter calendar windows, a greater number of new products? Just any thoughts there.

Kirk Tanner, CEO

Innovation is such an important part of what consumers are looking for, and our customers expect from us. You've seen us do things like Saucy Nuggs. We've also been very successful leveraging our Frosty brand. It's a brand that consumers love, and we've continued to innovate off those platforms. You'll see us innovate in the second half of the year. We'll innovate off of our core, we'll continue to innovate on platforms like Frosty, and I think innovation is an important part that kind of celebrates both our core business and our new consumer propositions that have some breakthrough. I think that's really important right now. We talk a lot about value, and value is critically important. Innovation is also important. Customers are looking and loving innovation. So we are going to stay focused on that.

Operator, Operator

Our next question comes from Brian Mullan of Piper Sandler. Your line is now open. Please go ahead.

Brian Mullan, Analyst

I would like to ask about the progress on expanding digital menu boards at the drive-through. What is the current status of the rollout at company stores? Also, could you remind us how many franchises currently have this capability? Is there a way to speed up the process for the franchises?

Gunther Plosch, CFO

Brian, yes, digital ecosystems are super important, and that's what the consumer expects. As you know, we have set aside $20 million in capital to complete the digital menu board rollout in the Company restaurants in '24 and '25. We are currently 30 to 35 units installed. We're obviously accelerating in the second half. We like what we see. It's a good experience for our consumer. It's a good experience for our crew members, since you obviously don't have to go out anymore and change our menu boards between rest of day and the breakfast menu. So yes, committed to the investment. It's contemplated in the cash flow and capital forecast.

Operator, Operator

Our next question comes from Lauren Silberman of Deutsche Bank. Your line is now open. Please go ahead.

Lauren Silberman, Analyst

Just on the guide, I want to confirm. The EBITDA and EPS being reaffirmed, it's primarily due to less breakfast advertising contribution this year. And then specific to the advertising, how'd you come to the decision to reduce the level of investment this year? Are you not seeing the returns as high as you would have expected?

Gunther Plosch, CFO

Good morning, Lauren. Just to clarify our EBITDA and EPS guidance. It is unchanged compared to previously. So, obviously, we had headwinds on the sales side since obviously, the midpoint of the guidance range shifted down a little bit. It's not because we are not competitive, right? We are maintaining share; it's because the category is a little bit softer than we expected. How did we overcome? The profit headwinds coming out of the sales shortfall in the optimization of the breakfast advertising investment of $5 million, and we also shifted the G&A outlook range down to $255 million to $265 million; a good portion of that was incentive comp rules, and a little bit of timing of new hires. Your specific question around the breakfast investment levels. We are obviously winning in the category. We have outgrown the category in the first half, so we are happy about that. But in the context of the whole environment, we absolutely believe, and we worked this a little bit with the media agencies, that in that environment we are better off stretching the investment over. Our planning assumption is now three years, extending it into 2026, and obviously, the reduction this year allowed us to stretch the investment out.

Operator, Operator

Thank you. Our next question comes from Brian Harbour of Morgan Stanley. Your line is now open. Please go ahead.

Brian Harbour, Analyst

Just a quick one on the development side. I think you said 2Q was in line with your expectations. Was that also true for just the closures that you had in the U.S. or could you kind of comment on that?

Gunther Plosch, CFO

Good morning, Brian. Yes, absolutely. It's in line with our expectations, right? As I said in the prepared remarks, our sales guidance for the year is 1% to 3% SRS and 2% net unit growth. That's unchanged versus what we have told you previously. We have reaffirmed again our gross openings of 250 to 300 units. So, it's all kind of where we thought it would be.

Operator, Operator

Our next question comes from David Palmer of Evercore. Your line is now open. Please go ahead.

David Palmer, Analyst

I'm wondering if we could maybe take a step back and think about the biggest opportunities and challenges, Kirk, that you see for the brand in the U.S. What are you hearing from franchisees about what you want to improve upon and they want to improve upon? And what are you seeing about these changes that can be made this year versus perhaps some longer-term changes that you see the brand making?

Kirk Tanner, CEO

Yes, David, thank you for your question. The team is focused on creating a positive flywheel effect. This approach benefits both our brand and our franchisees. It begins with being relevant in the current market, where we are competing effectively. Our continued focus must be on delivering results and gaining market share, emphasizing what Wendy's is known for. This is crucial. Additionally, we are working hard to enhance our economic model at the restaurant level and improve our margin performance, which we recognize as essential. We're also committed to our long-term unit performance and expanding by building new restaurants. This year, we have opened 99 new locations, and we plan to establish 250 to 300 more in 2024. These new openings are vital for brand building and tend to outperform existing restaurants. Overall, we are concentrating on growing our revenue, increasing market share, improving margins, and expanding our restaurant network. These are the key areas we are dedicated to, collaborating closely with our franchisees to achieve our goals.

Operator, Operator

Our next question comes from Sara Senatore of Bank of America. Your line is now open. Please go ahead.

Sara Senatore, Analyst

Great. I have one clarification and then a question. First, you mentioned that the industry was a bit softer than you had expected regarding your market share. Can you discuss any underlying dynamics you noticed, such as slower traffic? Are there specific groups affecting this, or is it related to ticket prices, potentially influenced by ongoing promotional activities? That was just for clarification. Now, regarding the restaurant mobile margins, you mentioned a wider range of sales. Has there been any change or impact from the U.K. restaurants? I know they were previously a diminishing drag, but has anything changed in that regard?

Gunther Plosch, CFO

Sara. In terms of our sales growth in the United States, we've seen about a 4% increase in pricing. Traffic has decreased by nearly 2%, accompanied by a slightly negative mix of just over 1%. This dip in traffic is related to the overall category decline. As mentioned earlier, our classic and dollar shares are consistent with the category trends. Regarding income segments, our research shows that consumers below $75,000 are visiting less frequently, while those above $75,000 are visiting more often. We are effectively competing with both income levels and maintaining our market share. The main challenge in our mix, slightly over 1%, arises from the aggressive promotion of premium sandwiches last year, which we did not replicate this year. Additionally, our continued focus on digital acquisition has resulted in a 6% boost in our loyalty program, which slightly affected our mix. Our value offerings, like the Biggie Bag, have not significantly impacted our mix and profitability from the previous year, as they have been well established nationally for several years.

Operator, Operator

Our next question comes from Jim Salera of Stephens. Your line is now open. Please go ahead.

Tyler Klaus, Analyst

This is Tyler Klaus on for Jim. Several peers in the industry have mentioned headwinds to same-store sales in California due to the recent price increases. Just going to see if you could give us an update on the market and if you had any particular callouts? And then I had one follow-up.

Kirk Tanner, CEO

Yes. I think that clearly, the consumer across the country has been well documented. There are certainly certain cohorts in the consumer base that are under pressure and more discerning in their decisions. As far as California goes, this is something that is unfortunate from a wage and labor standpoint, but the team is working against it. We've focused on driving more productivity and delivering the Wendy's promise in this light. These are opportunities where we feel like we still have to win, and we have a plan in place to do that. We have a proposition on our menu to do just that. But I think that if you look at where consumers are, our focus is on winning in this environment, winning and competing well in this environment. And we're doing that just with that strategy, including places like California. It goes to delivering our core, having compelling innovation and having relevant value, and this relevant value has allowed us to stay very competitive and win in this marketplace.

Operator, Operator

Thank you. At this time, we currently have no further questions for today. So that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.