Wingstop's (WING, Financial) Q3 report landed with a mix of growth and concern, as the company reported a 39% surge in sales alongside missed profit expectations. Shares tumbled over 20% this morning, marking an eight-month low despite a record 106 new restaurant openings and a 20.9% leap in same-store sales. Wingstop's revenue hit $162.5 million, and net income rose 32% to $25.7 million, or $0.88 per share—just shy of analyst projections by 7 cents. The numbers still underscore a strong year for Wingstop, which is up more than 90% in the past twelve months, outperforming competitors like Yum Brands (YUM, Financial), up only nearly 10%, and Restaurant Brands (QSR, Financial), up only nearly 5%.
What's weighing on Wingstop's bottom line is rising operational costs. Cost of sales nearly matched the revenue jump, hitting $24.4 million, driven by rising prices on bone-in chicken wings and packaging. The company also saw headcount expenses spike by 30% to support growth, with a 45% increase in advertising spend fueling brand expansion. These expenses, though strategic for Wingstop's rapid expansion, are putting pressure on profitability, a factor that has investors cautious about its future earnings trajectory as the brand continues its aggressive growth.
Looking forward, Wingstop remains optimistic, upping its 2024 expansion target to 320-330 new units from its previous 285-300 estimate, signaling confidence in its growth model. SG&A expenses are projected to reach up to $118.5 million, slightly above initial forecasts. While today's drop may rattle investors, Wingstop's long-term strategy to scale globally and retain brand loyalty shows no signs of slowing.
