Core Insights - Wendy's plans to reduce the number of promotions for the remainder of the year after experiencing challenges with too many initiatives during the summer [1][2] - The company reported earnings per share of $0.29, a 7.4% increase year-on-year, and revenue of $560.9 million, a 1.7% decrease, both exceeding analysts' expectations [3] - Foot traffic to Wendy's locations decreased by 3% compared to the same quarter last year, although this was an improvement from a 4.7% decline in Q1 [8] Promotions and Strategy - The interim CEO highlighted that the summer promotions, while appealing, overwhelmed restaurant teams and confused customers [2] - Future focus will be on chicken innovation and a new beverage lineup, including a collaboration with Netflix for the second season of "Wednesday" [3] Technology and Innovation - Wendy's is expanding its use of voice AI for drive-thru orders, aiming to implement this technology in up to 600 restaurants by the end of 2025 [9] - The company has been testing innovative drive-thru solutions, including food delivery robots in underground tunnels [9] Market Reaction - Following the earnings report, Wendy's shares increased by approximately 1.5% [4]

Financial Data and Key Metrics Changes - Global system-wide sales declined by 1.8% on a constant currency basis, driven by a 3.6% decrease in same restaurant sales in the U.S. [33][16] - Adjusted EBITDA was $146.6 million, an increase of 2.5% year-over-year, while adjusted earnings per share rose by 7.4% to $0.29 [38][18] - Free cash flow generated in the first half of the year was $109.5 million, reflecting strong cash generation capabilities [39] Business Line Data and Key Metrics Changes - The U.S. same restaurant sales declined by 3.6%, partially offset by a higher average check, while same restaurant sales at U.S. company-owned restaurants outperformed the U.S. system by almost 300 basis points, declining only 0.7% [33][34] - The international segment achieved system-wide sales growth of 8.7%, with notable increases in Japan (27%) and Mexico (16%) [35][34] Market Data and Key Metrics Changes - The company anticipates full-year global system-wide sales to decline between 3% to 5% year-over-year, reflecting a challenging competitive environment and dynamic consumer behavior [48][29] - U.S. company-operated restaurant margin is expected to be around 14%, with commodity inflation projected at approximately 4% [49] Company Strategy and Development Direction - The company is focusing on improving execution and performance while maintaining its long-term strategy, emphasizing the importance of franchisee partnerships [5][6] - Key strategic priorities include fresh food innovation, enhancing customer experience, and accelerating net unit growth, with a target of 2% to 3% net new unit growth for the year [30][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the consumer and competitive environment has changed significantly, leading to a revised outlook for the year [4][29] - The company is committed to strengthening its franchisee relationships and improving operational efficiencies to drive better results [14][15] Other Important Information - The company returned over $88 million to shareholders through dividends and share repurchases in the second quarter, totaling over $262 million in the first half of the year [18][43] - The company is on track to return approximately $325 million to shareholders in 2025, an increase of $40 million compared to 2024 [43] Q&A Session Summary Question: Assessment of marketing value menu performance - Management noted that the first half of the year faced challenges due to changing consumer behavior and weather impacts, leading to a reassessment of marketing strategies for the second half [61][60] Question: Franchisee sentiment and alignment on value - Management indicated that franchisee relationships are good but can be improved, emphasizing the need for better communication and prioritization of initiatives [72][74] Question: Revisiting U.S. franchise development - Management confirmed a commitment to improving franchisee economics through new data analytics capabilities and detailed P&L discussions at the restaurant level [86][87] Question: Customer satisfaction and same-store sales growth - Management is actively tracking customer satisfaction and believes improvements will lead to increased frequency of visits, with positive trends already observed [90][91] Question: Core menu pricing strategy - Management acknowledged the need to evaluate core menu pricing and emphasized the importance of quality in conjunction with pricing strategies [96][98] Question: Changes to chicken patty and focus on chicken - Management confirmed the use of high-quality ingredients for chicken products and expressed confidence in the new chicken tenders outperforming competitors in tests [107][108]

Company Performance - Wendy's reported quarterly earnings of $0.29 per share, exceeding the Zacks Consensus Estimate of $0.25 per share, and up from $0.27 per share a year ago, representing an earnings surprise of +16.00% [1] - The company posted revenues of $560.93 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.97%, although this is a decrease from year-ago revenues of $570.73 million [2] - Over the last four quarters, Wendy's has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance and Outlook - Wendy's shares have declined approximately 38.9% since the beginning of the year, contrasting with the S&P 500's gain of 7.8% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.25 on revenues of $557.94 million, and for the current fiscal year, it is $0.93 on revenues of $2.2 billion [7] Industry Context - The Retail - Restaurants industry, to which Wendy's belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Wendy's stock performance [5]

Q2 2025 Earnings Release Overview [Performance Summary & Highlights](index=1&type=section&id=Performance%20Summary%20%26%20Highlights) In Q2 2025, Wendy's experienced a global systemwide sales decline of 1.8%, driven by a 3.3% drop in the U.S. market, which was partially offset by strong international growth of 8.7%. Despite the sales dip, the company reported a 7.4% increase in both reported and adjusted diluted EPS to $0.29 and continued its global expansion by adding 44 new restaurants - Interim CEO Ken Cook highlighted strong momentum in the International business (**8.7% systemwide sales growth**) and acknowledged the need to improve U.S. performance by strengthening franchisee relationships, marketing effectiveness, and customer experience[3](index=3&type=chunk) Q2 2025 Operational Highlights (vs. Q2 2024) | Operational Highlights | US | Intl | Global | | :--- | :--- | :--- | :--- | | **Systemwide Sales Growth** | (3.3)% | 8.7% | (1.8)% | | **Same-Restaurant Sales Growth** | (3.6)% | 1.8% | (2.9)% | | **Net Restaurant Openings** | 9 | 17 | 26 | Q2 2025 Key Financial Highlights (vs. Q2 2024, in millions) | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $560.9M | $570.7M | (1.7)% | | Operating Profit | $104.3M | $99.5M | 4.8% | | Net Income | $55.1M | $54.6M | 0.9% | | Adjusted EBITDA | $146.6M | $143.1M | 2.5% | | Reported Diluted EPS | $0.29 | $0.27 | 7.4% | | Adjusted EPS | $0.29 | $0.27 | 7.4% | [Detailed Financial Analysis (Q2 2025)](index=2&type=section&id=Detailed%20Financial%20Analysis%20(Q2%202025)) The decline in total revenues was primarily due to lower U.S. restaurant sales and franchise royalties. Operating profit increased by 4.8% to $104.3 million, benefiting from lower advertising spend and G&A expenses, which offset margin pressures from commodity and labor inflation in U.S. company-operated restaurants. Adjusted EPS grew to $0.29, aided by share repurchases - The decrease in total revenues was mainly caused by lower U.S. Company-operated restaurant sales, reduced franchise royalty revenue, and lower advertising funds revenue[8](index=8&type=chunk) - U.S. Company-operated restaurant margin decreased from **16.5% to 16.2%** due to commodity and labor inflation and a decline in traffic, which were partially offset by a higher average check and labor efficiencies[9](index=9&type=chunk) - Operating profit grew primarily due to a decrease in the Company's investment in advertising spend, lower reorganization costs, and reduced general and administrative expenses[11](index=11&type=chunk) - The increase in Adjusted EPS was driven by fewer outstanding shares from the company's share repurchase program and an increase in Adjusted EBITDA[15](index=15&type=chunk) [Capital Allocation](index=3&type=section&id=Capital%20Allocation) In Q2 2025, the company returned $88.7 million to shareholders through dividends and share repurchases. A quarterly dividend of $0.14 per share was declared, and 4.8 million shares were repurchased for $61.9 million during the quarter - The company declared a regular quarterly cash dividend of **$0.14 per share**, payable on September 16, 2025[16](index=16&type=chunk) - Wendy's repurchased **4.8 million shares** for **$61.9 million** in Q2 2025. As of August 1, approximately **$40.2 million** remained available under the current share repurchase authorization[17](index=17&type=chunk) [Full-Year 2025 Outlook](index=3&type=section&id=Full-Year%202025%20Outlook) Wendy's reaffirmed its global net unit growth forecast of 2-3% but revised its full-year 2025 guidance downwards for several key metrics. The company now expects global systemwide sales to decline by 3.0% to 5.0% and adjusted EPS to be in the range of $0.82 to $0.89, a reduction from previous forecasts Updated Full-Year 2025 Guidance (in millions, where applicable) | Metric | Current Outlook | Previous Outlook | | :--- | :--- | :--- | | Global systemwide sales growth | (5.0)% to (3.0)% | (2.0)% to flat | | Adjusted earnings per share | $0.82 to $0.89 | $0.92 to $0.98 | | Adjusted EBITDA | $505M to $525M | $530M to $545M | | Free cash flow | $160M to $175M | $185M to $205M | - The company reaffirmed its guidance for Global net unit growth at **2% to 3%** and Capital expenditures plus franchise development fund investments at **$165 million to $175 million**[18](index=18&type=chunk) Financial Statements & Reconciliations [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2025, total revenues decreased to $560.9 million from $570.7 million in the prior year. However, operating profit increased to $104.3 million from $99.5 million, and net income rose slightly to $55.1 million, resulting in a diluted EPS of $0.29 Q2 2025 Statement of Operations (in thousands) | Line Item | Three Months Ended 2025 | Three Months Ended 2024 | | :--- | :--- | :--- | | Total Revenues | $560,929 | $570,727 | | Operating profit | $104,260 | $99,507 | | Income before income taxes | $75,900 | $74,823 | | Net income | $55,110 | $54,643 | | Diluted net income per share | $0.29 | $0.27 | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2025, Wendy's reported total assets of $4.89 billion, a decrease from $5.03 billion at the end of 2024. The decline was primarily driven by a reduction in cash and cash equivalents. Total liabilities remained relatively stable at $4.78 billion, while total stockholders' equity decreased significantly to $112.9 million from $259.4 million, largely due to treasury stock repurchases Balance Sheet Summary (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $281,226 | $450,512 | | Total current assets | $600,446 | $736,140 | | Total assets | $4,894,148 | $5,034,843 | | Total liabilities | $4,781,260 | $4,775,491 | | Total stockholders' equity | $112,888 | $259,352 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 29, 2025, net cash provided by operating activities was stable at $146.0 million. Net cash used in investing activities increased to $52.3 million due to higher capital expenditures. Financing activities used a significant $272.7 million, primarily for common stock repurchases ($186.5 million) and dividends ($76.2 million), leading to a net decrease in cash Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended 2025 | Six Months Ended 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Net cash used in investing activities | ($52,264) | ($43,958) | | Net cash used in financing activities | ($272,687) | ($162,382) | | Net decrease in cash | ($173,506) | ($64,175) | [Non-GAAP Reconciliations](index=11&type=section&id=Non-GAAP%20Reconciliations) This section provides reconciliations from GAAP measures to non-GAAP measures used by management, including Adjusted EBITDA, Adjusted Revenues, Adjusted Income, Adjusted EPS, and Free Cash Flow. These adjustments primarily remove the effects of advertising funds, system optimization, and other non-recurring items to provide a clearer view of core operating performance [Reconciliation of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA%20and%20Revenues%20to%20Adjusted%20Revenues) For Q2 2025, Net Income of $55.1 million was reconciled to an Adjusted EBITDA of $146.6 million. Total Revenues of $560.9 million were reconciled to Adjusted Revenues of $449.6 million, primarily by excluding advertising funds revenue Q2 2025 Reconciliation Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $55,110 | $54,643 | | **Adjusted EBITDA** | **$146,639** | **$143,125** | | Revenues | $560,929 | $570,727 | | **Adjusted revenues** | **$449,564** | **$455,663** | [Reconciliation of Net Income to Adjusted Income and Adjusted EPS](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Income%20and%20Adjusted%20EPS) In Q2 2025, GAAP Net Income of $55.1 million was adjusted to $56.1 million for Adjusted Income. Both GAAP Diluted EPS and Adjusted EPS were $0.29 for the quarter, as the per-share impact of adjustments was negligible Q2 2025 EPS Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (in thousands) | $55,110 | $54,643 | | **Adjusted income (in thousands)** | **$56,072** | **$56,646** | | Diluted earnings per share | $0.29 | $0.27 | | **Adjusted earnings per share** | **$0.29** | **$0.27** | [Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow](index=13&type=section&id=Reconciliation%20of%20Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Free%20Cash%20Flow) For the first six months of 2025, Net Cash Provided by Operating Activities of $146.0 million was reconciled to a Free Cash Flow of $109.5 million. This calculation subtracts capital expenditures and franchise development fund investments and adjusts for the impact of advertising funds Six-Month Free Cash Flow Reconciliation (in thousands) | Line Item | Six Months Ended 2025 | Six Months Ended 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Capital expenditures | ($39,050) | ($34,465) | | Franchise development fund | ($16,518) | ($11,477) | | **Free cash flow** | **$109,505** | **$112,874** | Disclosures & Definitions [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section contains the standard safe harbor statement, cautioning that forward-looking statements regarding future performance are subject to numerous risks and uncertainties. It lists 26 specific risk factors, including competition, economic conditions, consumer spending, supply chain issues, and the company's predominantly franchised business model, that could cause actual results to differ materially from expectations - The release contains forward-looking statements based on current expectations, which are subject to various risks and uncertainties that could cause actual results to differ[22](index=22&type=chunk) - Key risk factors include competition, adverse economic conditions, changes in consumer spending, food safety events, ability to achieve growth strategy, changes in operating costs, labor shortages, and risks associated with the company's franchised business model[23](index=23&type=chunk) [Disclosure Regarding Non-GAAP Financial Measures](index=6&type=section&id=Disclosure%20Regarding%20Non-GAAP%20Financial%20Measures) The company explains its use of non-GAAP financial measures such as adjusted revenue, adjusted EBITDA, adjusted EPS, and free cash flow. These measures are used internally for performance evaluation and benchmarking, as they exclude items that may not be indicative of core operating performance, providing investors with a supplemental perspective on business trends - The company uses non-GAAP measures like adjusted revenue, adjusted EBITDA, and adjusted EPS as internal metrics to evaluate operating performance and for executive compensation goals[27](index=27&type=chunk) - Free cash flow is defined as cash flows from operations minus capital expenditures, franchise development fund expenditures, and the net change in restricted advertising fund assets and liabilities[28](index=28&type=chunk) [Key Business Measures](index=7&type=section&id=Key%20Business%20Measures) This section defines the key business measures used by Wendy's to track performance, including same-restaurant sales, systemwide sales, and U.S. Company-operated restaurant margin. It clarifies that sales growth metrics are calculated on a constant currency basis and exclude Argentina due to its highly inflationary economy - Key business measures include same-restaurant sales, systemwide sales, and Company-operated restaurant margin[32](index=32&type=chunk) - Same-restaurant sales and systemwide sales growth are calculated on a constant currency basis to provide better year-over-year comparability and exclude sales from Argentina[35](index=35&type=chunk)[36](index=36&type=chunk) - U.S. Company-operated restaurant margin is defined as sales from U.S. Company-operated restaurants less cost of sales (food, paper, labor, occupancy, advertising, other operating costs) divided by those sales[37](index=37&type=chunk)

Core Viewpoint - The Wendy's Company reported a decline in overall systemwide sales for the second quarter of 2025, primarily due to lower same-restaurant sales in the U.S., while the international segment showed strong growth. Operational Highlights - The company opened 44 new restaurants in the second quarter, totaling 118 new openings in the first half of 2025 [2] - International systemwide sales grew by 8.7%, while U.S. systemwide sales declined by 3.3% [2][5] - Same-restaurant sales growth in the U.S. was down 3.6%, compared to a 1.8% increase in the international segment [2][5] - The total restaurant count at the end of the quarter was 7,334, with 5,967 in the U.S. and 1,367 internationally [2] Financial Highlights - Total revenues for the second quarter were $560.9 million, a decrease of 1.7% from the previous year [4] - Adjusted revenues were $449.6 million, down 1.3% year-over-year [4] - U.S. Company-operated restaurant margin decreased to 16.2%, down from 16.5% [4][7] - Operating profit increased to $104.3 million, up 4.8% from the previous year [4][10] - Net income for the quarter was $55.1 million, a slight increase of 0.9% [4][11] - Reported diluted earnings per share were $0.29, reflecting a 7.4% increase [4][13] Cash Flow and Shareholder Returns - Cash flow from operations was $146.0 million, a 0.3% increase year-over-year [4] - The company returned $88.7 million to shareholders through dividends and share repurchases [9] - The company repurchased 4.8 million shares for $61.9 million in the second quarter [15] 2025 Outlook - The company reaffirmed its global net unit growth target of 2-3% and capital expenditures between $165 million and $175 million [16] - The updated expectations for global systemwide sales growth are now between -5.0% to -3.0% [16] - Adjusted earnings per share are expected to be between $0.82 and $0.89, down from previous estimates [16]

Core Viewpoint - Wendy's Company is expected to report a decline in earnings and revenue for the second quarter compared to the previous year [1][2] Financial Performance - Analysts predict quarterly earnings of 25 cents per share, down from 27 cents per share in the same period last year [1] - Projected quarterly revenue is $558.03 million, a decrease from $570.73 million a year earlier [1] Analyst Ratings and Price Targets - Citigroup analyst Jon Tower maintained a Neutral rating and reduced the price target from $13.75 to $11.5 [4] - B of A Securities analyst Gregory Francfort maintained a Buy rating but lowered the price target from $13 to $11 [4] - Morgan Stanley analyst John Glass kept an Underweight rating and cut the price target from $13 to $11 [4] - Truist Securities analyst Jake Bartlett maintained a Buy rating and reduced the price target from $16 to $14 [4] - BMO Capital analyst Andrew Strelzik maintained a Market Perform rating and lowered the price target from $17 to $15 [4] Stock Performance - Wendy's shares fell 0.8% to close at $9.96 on Thursday [2]

Core Viewpoint - Wendy's is expected to report a decline in second-quarter revenue and earnings per share, continuing a trend of missed analyst estimates in recent quarters [1][2]. Financial Performance - Analysts estimate second-quarter revenue at $560.4 million, down from $570.7 million in the previous year [1]. - Expected earnings per share for the second quarter is 26 cents, a decrease from 27 cents in the same quarter last year [2]. - Wendy's has missed analyst estimates in six of the last ten quarters [2]. Traffic and Sales Trends - Wendy's visits decreased by 3.0% year-over-year in the second quarter, an improvement from a 4.7% decline in the first quarter [3]. - The company reported a sales decline of 2.1% year-over-year in the first quarter, with U.S. sales down 2.6% [4]. Promotions and Future Growth - The second quarter included several promotions, such as new Frosty's and the Cajun Crunch Spicy Chicken, along with free fries offerings [4]. - A new promotion, "Meal of Misfortune," in partnership with Netflix's "Wednesday," is set to launch in the third quarter, which may help drive future traffic [5][7]. - Wendy's is focusing on international expansion, with plans to achieve 70% of unit growth outside the U.S. and aims to reach 2,000 international restaurants by 2028 [8][9]. Leadership Changes - The company is currently searching for a new CEO following Kirk Tanner's departure, with CFO Ken Cook serving as interim CEO [7]. Stock Performance - Wendy's stock is currently flat at $10.02, down 37.8% year-to-date, within a 52-week trading range of $9.74 to $20.60 [9].

Core Viewpoint - Analysts project that Wendy's will report quarterly earnings of $0.25 per share, reflecting a year-over-year decline of 7.4%, with revenues expected to reach $555.52 million, down 2.7% from the same quarter last year [1]. Earnings Estimates - The consensus EPS estimate has been revised downward by 0.8% over the past 30 days, indicating a collective reassessment by analysts [2]. - Revisions to earnings estimates are significant indicators for predicting investor actions regarding the stock, with empirical research showing a strong correlation between earnings estimate trends and short-term stock price performance [3]. Revenue Projections - Analysts estimate that revenues from company-operated restaurants will be $230.36 million, a decrease of 3% year-over-year [5]. - Projected revenues from advertising funds are estimated at $110.57 million, reflecting a decline of 3.9% from the prior year [5]. - Franchise rental income is expected to reach $60.37 million, indicating a slight decrease of 0.4% from the previous year [6]. - Franchise royalty revenue and fees are projected at $153.65 million, down 2.6% from the same quarter last year [6]. Restaurant Metrics - The total number of restaurants is projected to be 7,336, an increase from 7,261 reported in the same quarter last year [7]. - The number of international restaurants is estimated at 1,367, up from 1,236 year-over-year [7]. - The consensus for total franchised restaurants stands at 6,933, compared to 5,614 in the same quarter last year [8]. - The number of company-operated restaurants is expected to be 402, slightly up from 399 year-over-year [8]. Systemwide Sales - Analysts forecast that systemwide sales for international company-operated restaurants will reach $7.19 million, compared to $6.20 million last year [9]. - Systemwide sales for U.S. company-operated restaurants are expected to be $223.77 million, down from $231.20 million year-over-year [9]. Stock Performance - Wendy's shares have shown a return of -10.6% over the past month, contrasting with the Zacks S&P 500 composite's increase of +1.2% [10]. - With a Zacks Rank of 4 (Sell), Wendy's is anticipated to underperform the overall market in the near future [10].

Core Viewpoint - The Wendy's Company is expected to report second-quarter 2025 results on August 8, with earnings anticipated to decline due to soft consumer demand and weak traffic trends [1][10]. Group 1: Earnings and Revenue Estimates - The Zacks Consensus Estimate for earnings is set at 25 cents per share, reflecting a 7.4% decrease from the previous year [2]. - Revenue is projected at $555.5 million, indicating a decline of 2.7% compared to the same quarter last year [2]. Group 2: Factors Impacting Performance - The company's second-quarter performance is likely to be negatively impacted by soft consumer demand, particularly among lower-income households, which have reduced spending by high single to low double digits [3]. - Quick-service restaurant traffic trends have shown mid-single-digit declines in the first quarter, with no signs of recovery in early second-quarter 2025, limiting Wendy's growth potential [4]. Group 3: Strategic Initiatives - Wendy's has launched several initiatives, including the "100 Days of Summer" campaign and new Frosty collaborations, aimed at adapting to changing consumer preferences; however, these initiatives began rolling out late in the quarter, limiting their immediate impact [5]. Group 4: Sales and Margins - Total U.S. sales for Wendy's are predicted to decline by 4.6% in the second quarter, while international sales are expected to increase by 9.3% year over year [6]. - The bottom line is anticipated to decline due to commodity inflation and an uncertain macro environment, with total costs and expenses expected to decrease by 1.5% to $464.2 million [7]. - Adjusted EBITDA is projected to decline by 2.4% to $139.7 million, with the Adjusted EBITDA margin increasing by 10 basis points to 25.2% [8].

Summary of US Consumer Tracker (2Q25) Industry Overview - **Industry**: US Consumer Sector - **Key Focus**: Impact of inflation, consumer sentiment, and tariffs on spending behavior Core Insights 1. **Inflation and Consumer Income**: - Inflation has increased, with a notable rise to 2.7% in June 2025, while real disposable income has declined sequentially in May 2025 [3][15] - Tariff-driven inflation is expected to further impact consumer prices in the second half of 2025 [2] 2. **Consumer Sentiment**: - Consumer sentiment showed slight recovery in June but remains significantly lower year-to-date in 2025, particularly among high-income consumers concerned about inflation and employment [3][17] - The trade-down effect is evident as consumers shift to lower-priced options due to economic pressures [3][17] 3. **Retail Sales Trends**: - Retail sales growth has normalized after an earlier pull forward, indicating stable shopping behaviors despite economic challenges [3][21] - Categories such as home goods and toys have turned inflationary in Q2 2025, contributing to a weak consumer backdrop [3][87] 4. **Sector Performance**: - **Broadlines & Hardlines Retail**: Companies like Dollar General (DG), Dollar Tree (DLTR), and Walmart (WMT) are expected to benefit from trade-down trends, with WMT well-positioned due to its enhanced shopping experience [4] - **Specialty Retail**: Anticipated price increases of high single digits to low double digits for apparel and footwear, and over 20% for hard goods due to tariffs, may impact Q3 spending [5] - **Restaurants**: A macro deceleration in May affected spending, with potential declines in 2026 due to SNAP benefit reductions [6] - **Alcohol Sector**: Consumption is pressured by affordability concerns, particularly among low-income consumers [7] 5. **Investment Ratings**: - **Retailing**: Outperform ratings for WMT, COST, DG, and LOW; Market-Perform for HD and DLTR; Underperform for TGT [11] - **Food Sector**: Outperform ratings for MKC, MDLZ, SMPL, and CPB; Market-Perform for several others [11] - **Apparel & Specialty Retail**: Outperform ratings for brands like NKE, TJX, and LULU; Market-Perform for CPRI and ROST [11] Additional Insights 1. **Consumer Behavior**: - The gap between low-income and high-income consumer sentiment has narrowed, indicating a shift in spending patterns [13][17] - Cooking from scratch is increasing as consumers seek value amid rising prices [7] 2. **Economic Indicators**: - The unemployment rate remains low, but consumer credit growth has decelerated in a high-rate environment [13][51] - The 10-Year Treasury yield remains elevated, reflecting higher inflation expectations [46][48] 3. **Inflation Dynamics**: - Cumulative inflation since January 2019 is at 28%, with food and energy leading the increases [94][96] - General merchandise categories have recently turned inflationary, influenced by tariff-driven price increases [83] This summary encapsulates the key findings and implications from the US Consumer Tracker for Q2 2025, highlighting the challenges and opportunities within the consumer sector amidst ongoing economic pressures.