Watch out leading QSR brands. Wingstop is gunning for you.
As brands like McDonald’s, KFC and others fret about losing price-weary consumers, Wingstop on Wednesday reported a 21.6% increase in domestic same-store sales the first quarter, driven almost entirely by transaction growth. That’s lapping a strong first quarter in 2023, resulting in two-year comps up more than 40%.
Systemwide sales topped $1 billion for the first time, marking an increase of 36.8%. The Dallas-based chain’s domestic average unit volume has increased to nearly $2 million, up from $1.5 million two years ago. And Wingstop said it acquired more new guests during the March 30-ended quarter than ever, and those new guests represented all income levels and cohorts.
And, despite the challenging macroeconomic climate, CEO Michael Skipworth sees plenty of opportunity ahead for sales growth as the wings concept continues on a path to becoming a top 10 global QSR brand.
“We believe that the indulgent Wingstop occasion delivers upon both quality and value, and has us uniquely positioned,” said Skipworth. “Consumers are choosing Wingstop when they do decide to spend some of those discretionary dollars on dining out.”
With moves still to come this year to boost brand awareness and increase frequency, the company raised its guidance for 2024, saying same-store sales are expected to be in the low double-digits, rather than the mid-single digit increase predicted earlier.
Net income increased 83.5% to $28.7 million, on revenues of $145.8 million for the quarter.
The strong results increased advertising fees to $12.7 million, enabling the company to increase spending on national advertising during events like the NFL playoffs, and the brand is also a presenting sponsor for NBA primetime.
By the end of the second quarter, the company also plans to complete a rollout of its new proprietary tech stack, My Wingstop, which Skipworth sees as a key enabler in the chain’s goal of 100% digital ordering with its improved app and web experience.
During the first quarter, 68% of sales came through digital channels, and early results from My Wingstop are encouraging, said Skipworth.
“The investments we are making in technology allows us to leverage our growing database and create an entirely new level of personalization with our guests, one that, we believe, over time will drive conversion retention rates and frequency,” he said.
Wingstop saw the opening of 65 net new restaurants during the quarter for a total of 2,279 mostly franchised units, of which 305 are outside the U.S.
Skipworth said the company has a record 1,400 commitments under development with franchisees enjoying cash-on-cash returns of more than 70%, which has fueled significant demand for more growth. The company also plans to add 275 to 295 net new restaurants this year, up from 240 to 250 in 2023.
International is another channel “supercharged for growth,” Skipworth said. In the United Kingdom, restaurants are averaging $2.5 million in annual sales, and franchise partners there plan to expand to more than 40 units, he said. Newer markets in Canada, Puerto Rico and Korea are also seeing record sales.
And there are levers Skipworth said the company has yet to pull.
Wingstop units could get faster, for example.
“We focused a lot of our technology investments over the year on the digital ordering experience, the consumer facing experience, and we see an opportunity to leverage technology over time in the back of the house that could improve speed,” said Skipworth. “But, obviously, with our low frequency, indulgent occasion, consumers are okay with the speed of service we offer today. But as we look out longer term, and as we’re bringing in these new guests into the brand, we do see an opportunity to work on getting faster.”
Another opportunity for the brand: chicken tenders.
Wingstop introduced a line of chicken sandwiches in 2022 that has helped boost boneless chicken to close to 50% of sales. Today, chicken tenders sales are in the low single digits as part of the overall mix, but Skipworth said tenders offer another value proposition that could help differentiate the brand.
But that’s gunpowder Wingstop is keeping dry, for now.
“We’ll talk about that when then time is right,” he said.
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