facebook pixal
Financing

Amid rare sales slide, Wingstop pulls some growth levers

The chain is joining Uber Eats and expanding chicken sandwiches nationwide after same-store sales fell 3.3%.
Wingstop restaurant exterior at night
Wingstop saw traffic fall in the second quarter as inflation rose. / Photograph: Shutterstock

Something unusual happened at Wingstop in the second quarter: Its same-store sales, which have been positive on an annual basis for 18 consecutive years, declined. 

Domestic comps at the 1,858-unit chicken wing chain fell 3.3% in the period ended June 25, which executives attributed to a “perfect storm” of factors, including tough comparisons to a year ago as well as rising gas prices and other inflation that depressed consumer activity.

“We clearly did see a pullback in frequency, particularly with that low-income consumer,” said CEO Michael Skipworth on a call with analysts Thursday.

And yet the chain believes it can continue its growth streak this year with a handful of strategic moves designed to drive traffic in the second half.

The chain is expanding its relationship with delivery provider Uber Eats nationwide, for instance, which it expects to bring in new customers. Until recently, Wingstop had been listed only on DoorDash.

It’s about two weeks into the new partnership, and results have been “at or above our expectations,” Skipworth said. “That’s without really any advertising support about us being on Uber’s platform.”

In another big step, Wingstop will start serving chicken sandwiches nationwide after tests in four markets yielded encouraging results. The lineup of 11 sandwich options, rolled out in 60 restaurants in May, registered a 4% sales mix and was “highly incremental” to sales, Skipworth said.

The chain also has some dry powder in its advertising budget to further spur sales. 

“We know that each of these levers will bring in transaction growth,” Skipworth said, adding that the chain has been “thoughtful” about deciding when to pull them.

With that, it reiterated its expectation for low single-digit same-store sales growth for the full year.

And even as its sales slid, the chain continues to boast a unique competitive advantage on the bottom line: While just about every restaurant’s food costs are going up, Wingstop’s are falling. 

Bone-in chicken wing prices in the quarter fell 18.8% year over year, the chain said, and it’s anticipating an 800 basis-point improvement in food costs compared to the second half of 2021.

“Wingstop is a year ahead of other brands” on commodity inflation, Skipworth said. “We are experiencing meaningful deflation in our business as the price of wings has normalized from unusually high levels in 2021.”

Net income for the quarter rose 17.6% to $13.3 million compared to a year ago. Cost of sales did increase slightly, to $14.9 million from $14.2 million, due to higher labor costs and other expenses associated with the opening of six restaurants in New York City. 

The chain believes its commodity advantage combined with a new set of sales drivers have it poised for a strong rest of the year. Investors seemed to agree: Wingstop’s stock shot up more than 28% as of midday Thursday.

“It really puts us in a spot that I think really highlights the unique Wingstop story” Skipworth said. “We’re pretty excited about the back half of the year.” 

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Trending

More from our partners