Even in non-football season chicken wings still seem to be the fast-food of choice.
Actually, that is chicken wings served up by Wingstop (WING).
Wingstop, which operates more than 1,300 restaurants mostly in the U.S., said Thursday that second quarter domestic same-store sales spiked 12.8%. Net sales rose 31% to $48.6 million, beating Wall Street forecasts of $48 million. Earnings came in at 17 cents a share, in-line with analyst projections.
The company credited an expanding delivery service and stepped up national marketing for the surprising sales pop. Wingstop’s new delivery service is now live at close to 70% of its restaurants. The goal by yearend is to have it available at 80% of its locations. Meanwhile, sales placed from Wingstop’s mobile app surged 34% in the quarter.
“I think it’s a demonstration that we operate a brand in a category in and of itself — we are a meal replacement option,” Wingstop CEO Charlie Morrison told Yahoo Finance in a phone interview when asked to explain the bang-up quarter.
Wingstop shares, however, did trade down about 4% on the news Thursday.
Despite the quarterly sales strength, Wingstop only reiterated its full-year profit outlook even as it lifted its domestic same-store sales forecast. For investors who have sent the growth restaurant’s stock up 40% year-to-date, the cautiousness was unlikely welcome.
But the guidance shouldn’t be a surprise, as it reflects investments Wingstop is making in advertising and technology to set the stage for hundreds of more restaurant openings in coming years. In fact, Wingstop signaled to Wall Street months ago the increased pace of investments were on the way.
The commentary on investment spending is probably not going to shake the confidence of many WingStop bulls.
“We believe Wingstop merits a premium valuation based on: (1) unit development momentum and quality, (2) consistent market share gains, and (3) near 100% free cash flow conversion with visibility into consistent double-digit free cash flow growth,” Wells Fargo restaurant analyst Jon Tower wrote in a note heading into Wingstop’s results.
It has been a good quarter for fast food
Make no mistake about it, the fast-food industry had an impressive second quarter amid a bevy of new menu items and new delivery services. But the traditional players in fast food didn’t have quite the showing of a Wingstop, to Tower’s point on market share gains.
Chipotle (CMG) notched an insane 10% same-store sales increase in the second quarter, That result was fueled mostly by growth in the number of transactions.
Over at McDonald’s (MCD), its U.S. same-store sales spiked 5.7% on the back of momentum behind delivery via Uber Eats, menu innovation and bundle deals.
And Yum! Brands’ Taco Bell (YUM) notched a 7% same-store sales increase in the quarter.
Good, but no Wingstop.