After a year of grappling with challenging chicken commodity prices and same-store sales declines in the first half of the year, Wingstop ended 2022 on a high note by bucking a number of industry trends.
While other limited-service chains were attributing same-store sales growth largely to menu price increases in the fourth quarter, Wingstop said its domestic comp sales increase of 8.7% was driven entirely by transactions.
Other chains watched digital orders decline as more guests returned to restaurants in 2022. But Wingstop said its digital transactions stayed “sticky,” reaching $1.7 billion, or more than 63% of sales, even as restaurants reopened.
And as other chains saw inflation-weary consumers pull back from delivery, Wingstop is now looking to nearly double its percentage of delivery sales—now at about 30%. The Dallas-based chain also expanded its delivery reach with the addition of Uber Eats as a second national partner, in addition to DoorDash.
“We are just scratching the surface on delivery,” said Michael Skipworth, Wingstop’s president and CEO in an earnings call on Wednesday.
In addition, other chains saw lower-income guests pull back in 2022 as inflation stretched budgets thin. Wingstop, on the other hand, saw no real decline in lower-income diners.
“What we’ve seen historically, and I think what we saw in 2022 is these consumers have a tendency, if they are going to pull back on dining out occasions, they typically first target their more high-frequency occasions, so it’s the four to five times a week, heavy QSR business,” said Skipworth.
Wingstop is a more indulgent occasion and guests don’t visit as often, but it becomes a reward, he said.
Lower-income diners “almost find themselves in a situation where they feel like they’ve saved money throughout the month, and they deserve to reward themselves,” said Skipworth. “And if we’re presenting them with value and top of mind, we’ve demonstrated the ability to retail those indulgent occasions.”
Chicken commodity prices declined dramatically in the second half of the year, boosting unit-level economics for Wingstop’s mostly franchised system, with average unit volumes reaching $1.6 million, moving closer to the chain’s target of surpassing $2 million. The cost of bone-in chicken wings, for example, declined by almost 50% in the fourth quarter, and Skipworth expects deflation to continue this year.
Wingstop’s introduction of chicken sandwiches last year has also helped boost profitability. Sandwiches now represent high-single-digits as a mix of sales, and have proven to be highly incremental, selling well at lunch and as an add-on, rather than a trade down.
There is more opportunity to grow both sandwich sales and tenders, Skipworth said. And increasing the boneless chicken mix to more than 50% of sales would help drive food costs down to the low 30% range.
Systemwide sales in the fourth quarter grew nearly 29% to $775.7 million. Net income increased more than 155% to $17.6 million, or 59 cents per share, compared with $6.9 million, or 23 cents per share, a year ago. Total revenue increased more than 45% to $104.9 million, including an extra week.
For the year, systemwide sales increased nearly 17% to $2.7 billion. Revenue increased more than 26% to $357.5 million. Net income was up 24% to $52.9 million, or $1.77 per share, compared with $42.7 million, or $1.42 per share, a year ago.
Wingstop saw the opening of 228 net new restaurants in 2022, including 61 in the fourth quarter alone, for a total of 1,959 worldwide. Of those, 1,678 were franchise units.
The chain entered two new international markets: Canada and Korea, and Skipworth said the brand’s international potential is “supercharged for growth.” In the U.K., for example, where Wingstop has 28 units, restaurants are already seeing more than $2 million AUVs.
For 2023, the chain is expecting another record year, with same-store sales growing in the mid-single-digits, and unit count increasing by another 240 net new restaurants, a 12% increase over 2022.
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