S&P Global Downgrades Wendy's Outlook Rating Due to Decline in Sales

LootboxPhobia · 2026-02-25T10:48:59+00:00

S&P Global Ratings has downgraded Wendy's Hamburgers' outlook from Stable to Negative, maintaining a "C+" credit rating, with an expected leverage ratio of 6.8x by 2026. Due to restaurant closure plans and declining same-store sales, revenue in 2026 may remain flat or decline, with EBITDA margins contracting to 26%. Although company-operated stores perform relatively well, free cash flow is projected to decrease to approximately $160 million in 2026.

LootboxPhobia

2026-02-25 10:48:59

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Investing.com - Standard & Poor’s Global Ratings today downgraded Wendy’s (NASDAQ: WEN) outlook from Stable to Negative, while affirming the company’s issuer credit rating at “B+”. The rating agency expects the company’s adjusted leverage ratio to reach approximately 6.3x in 2025 and to worsen further to about 6.8x in 2026.

The outlook downgrade reflects Wendy’s underperformance in 2025, with S&P Global Ratings currently forecasting flat or low-single-digit revenue decline in 2026. The expected deterioration in performance is driven by announced restaurant closures, anticipated low-single-digit same-store sales declines, and increased company cost investments.

S&P Global Ratings expects that, as part of Wendy’s store network optimization plan, restaurant closures in the first half of 2026 will account for 5% to 6% of the total U.S. restaurant base, including the 28 closures in Q4 2025. The rating agency forecasts that, due to rising general and administrative costs and declining profit margins at company-operated stores, EBITDA margins will contract to the low to mid-20% range in 2026, down from 28% in 2025.

The company’s “Project Fresh” transformation strategy has shown positive results in company-operated stores, which outperformed the overall franchise stores by 410 basis points in Q4 and by 310 basis points for the full year 2025. About 20% of franchisees have begun implementing operational improvements, and S&P Global Ratings expects broader adoption throughout the year to support stable customer traffic.

S&P Global Ratings expects free cash flow to decline from $204 million in 2025 to approximately $160 million in 2026, mainly due to lower adjusted EBITDA. The rating agency’s base case assumes Wendy’s will continue its approximately $107 million annual dividend payout but will not repurchase shares until leverage falls below its maximum target of 5x.

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