Wingstop 4Q23: U.S. Comps +21.2%, Restaurant Operating Margin Improved 1.3%

Feb 28, 2024 | Insights, Restaurant Research

Wingstop’s impressive 4Q comp growth was especially notable because it was primarily driven by traffic during a time when the industry was suffering traffic losses. Management further noted that its sales benefit from competitive wing promotions which act to draw consumers into its own stores. Top-line growth is supported by an expanding marketing budget (the company’s 2023 ad expense increased +35% y/y) fueled by an AUV closing in on the $2MM mark, together with an abundance of unit development (1,400 restaurant commitments under development agreement at the end of 2023).

Sales Performance

  • A 4Q23 +21.2% comp increase, which was driven almost exclusively by traffic, reflects the chain’s success in increasing transaction frequency among all income cohorts (including the struggling low-income demo).
  • The chain’s digital sales mix, which increased +4% y/y to 67% in 2023, is expected to further increase with the 2024 intro of its MyWingstop platform which will improve the digital order experience.
  • Its AUV increased +$200k y/y to $1.8MM, well on its way to reaching its $2MM goal.
  • A record development pipeline is driven by: 70% cash-on-cash return for new builds; <2 year payback period; and <$500k upfront investment.
  • System sales increased +27% y/y to $3.5B during 2023, with the system’s unit count increasing +13% to 2,214 units at the end of 2023. Management expects to scale Wingstop to 7,000 units.
  • 2024 guidance: mid-single digit comp growth, with +1% to +2% pricing (excluding California); and 270 global net new units.

Menu

  • Chicken sandwich menu innovation continues to bring in new, higher frequency guests who prefer margin-friendly boneless products.
  • Management is confident that its chicken tenders, which currently mix in the low-single digits, have the potential to attract new customers.

Margin

  • A 1.3% improvement in its restaurant operating margin to 24.9% during the quarter was primarily driven by sales leverage on labor & operating expenses.
  • The cost of bone-in chicken wings decreased -27.1% y/y during 2023.
  • Utilization of chicken breast meat provides further margin relief & the system’s 47% boneless mix benefits from a food cost in the low 30% range.
  • 2024 food costs for company stores are expected to be in the mid 30% range (consistent with 34.5% reported during 2023).
  • The company’s adjusted EBITDA increased +36% during 2023.

Wingstop 4Q23 Financials

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