Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wingstop Inc (WING, Financial) reported a remarkable 28.7% same-store sales growth, primarily driven by transaction growth.
- The company opened 73 net new restaurants in Q2, setting a record for the quarter.
- Adjusted EBITDA grew by 50.7% year-over-year to $51.8 million.
- Digital sales represented 68.3% of total sales, with a database of over 45 million users.
- Wingstop Inc (WING) raised its AUV target to $3 million and increased its development outlook to 285-300 net new restaurants for 2024.
Negative Points
- Despite strong performance, brand awareness has only increased by a few percentage points year-over-year.
- The company faces significant competition in the chicken sandwich market, which could impact future growth.
- SG&A expenses increased by $6 million year-over-year, driven by investments and performance-based compensation.
- The recent market movement in bone-in wing prices could pose a challenge to maintaining food cost targets.
- There is no specific timeline provided for achieving the new $3 million AUV target, which may create uncertainty among investors.
Q & A Highlights
Q: Can you share where Wingstop's brand awareness stands compared to larger national brands?
A: Our brand awareness has only increased by a few percentage points year-over-year, despite over 20% same-store sales growth. The gap between us and more mature national brands remains significant, in the double-digit range. This gap, combined with our strategies, gives us confidence in achieving our new AUV target of $3 million.
Q: Will Wingstop continue advertising the chicken sandwich platform?
A: Yes, the chicken sandwich has been an easy entry point for new guests, who then explore the rest of our menu. Our advertising strategy will continue to focus on building brand awareness and showcasing our variety of flavors.
Q: Can you provide insights into the consistency of comp trends and any changes in consumer behavior?
A: Our Q2 comp trends were consistent throughout the quarter, showcasing the strength of our business. Wingstop operates in a category of one, and our strategies, such as menu innovation and expanding delivery channels, continue to drive growth regardless of the macroeconomic environment.
Q: How did you determine the new target of 6,000 U.S. units?
A: We conducted a detailed analysis, considering the performance of mature markets like DFW and the potential in emerging markets. This led us to confidently increase our total addressable market to over 6,000 units in the U.S., more than tripling our current footprint.
Q: Are there any constraints in achieving the new AUV target of $3 million?
A: No, we don't foresee any capacity constraints. Over 10% of our system is already achieving $3 million AUVs. The key difference is the tenure of these restaurants, which have had more time to participate in our consistent same-store sales growth.
Q: How does Wingstop's supply chain strategy impact pricing and food costs?
A: Our supply chain strategy mitigates volatility in food costs. For example, despite the spot market price for wings being over $2.30, our food costs remained below 36%. This allows us to remain disciplined on pricing and maximize transaction growth.
Q: What are the key learnings from the early test of the My Wingstop platform?
A: The feedback from team members and brand partners has been positive, particularly regarding operational capabilities. The consumer-facing experience launched after the full rollout, and we are encouraged by the early results.
Q: How does Wingstop plan to expand in Western Europe and other international markets?
A: We are replicating our proven playbook from the UK across other markets. We see significant opportunities in regions like Canada, Puerto Rico, and Paris. Our international business is experiencing double-digit growth, similar to the U.S., and we are bullish about our global expansion potential.
Q: How does Wingstop's bundle strategy compare to competitors' price promotions?
A: Our bundle strategy is not reactive but has been part of our playbook for years. It highlights the group occasion that Wingstop excels in. Despite the competitive environment, our Q2 results show that our strategies are working well, and we will continue to lean into them.
Q: How does Wingstop's digital sales mix and the My Wingstop platform impact future growth?
A: Digital sales grew, but the channel mix remained consistent with Q1. We are excited about the My Wingstop platform, which will drive hyper-personalization and enhance the digital guest experience, ultimately increasing digital sales and average check.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
