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    Wingstop (WING)

    Q3 2024 Earnings Summary

    Reported on Oct 30, 2024 (Before Market Open)
    Pre-Earnings Price$368.94Last close (Oct 29, 2024)
    Post-Earnings Price$315.25Open (Oct 30, 2024)
    Price Change
    $-53.69(-14.55%)

    What went well

    • Consistently strong same‐store sales growth and rising AUVs: Executives repeatedly highlighted robust 20%+ comp growth driving AUVs above $2.1 million, which bodes well for sustainable top‐line performance and margins.
    • Robust expansion supported by existing brand partners: With 95% of new restaurant openings coming from reinvestments by current partners and a record development pipeline, the growth engine and market confidence remain very strong.
    • Effective supply chain management mitigating input cost pressures: Despite wing inflation peaking over 200%, strategic actions kept company food costs around 37% and secured brand partners a 300‐basis point cost advantage, supporting long‑term profitability.

    What went wrong

    • Potential Deceleration in Same-Store Sales Growth: Analysts questioned whether Q4 same-store sales comps might slow from the robust 20% growth seen in Q3 to around 10%, raising concerns about sustainability on a quarterly basis.
    • Margin Pressure from Volatile Food Costs: Company restaurants reported food costs of 37% amid wing price inflation peaking over 200% in the spot market. Despite supply chain strategies, further cost volatility could pressure margins if not effectively contained.
    • Reliance on Existing Brand Partners: With approximately 95% of new restaurant openings coming from existing brand partners, the company faces concentration risk. If these partners slow their reinvestment or experience market saturation, future growth may be adversely impacted.

    Q&A Summary

    1. Comp Guidance
      Q: Reason for slower Q4 comps?
      A: Management stressed they aren’t managing for one quarter; despite hints of a Q4 slowdown, the focus remains on sustaining over 20% same‐store sales over a two‐year span, reflecting a resilient business model.

    2. Unit Growth
      Q: Will mid-teen unit growth persist?
      A: Leaders expressed confidence in a disciplined, record‐strong pipeline driven by existing brand partners, supporting sustained mid-teen new store growth into 2025.

    3. Margins & Food Costs
      Q: How are food costs trending?
      A: Company restaurants reported food costs around 37%—with expectations for a slight Q4 improvement—while brand partners benefit from a 300bps lower rate due to a favorable product mix.

    4. AUV Expansion
      Q: Is there more AUV upside?
      A: With AUVs currently at $2.1M, the team remains focused on pushing toward a $3M target through strategic initiatives and digital enhancements.

    5. International Growth
      Q: Which markets drive 750-unit opportunity?
      A: The opportunity spans new international markets including France, several Gulf countries, and Australia, aggregating to over 750 future restaurants.

    6. SG&A Guidance
      Q: Any surprises in SG&A spend?
      A: Increases stem mainly from performance-based stock compensation; overall, SG&A is showing improved leverage relative to rising sales.

    7. NBA Partnership
      Q: Impact of NBA sponsorship on brand?
      A: The NBA deal is set to boost visibility via TV integrations and event activations, strengthening top-of-mind brand awareness.

    8. Volume & Frequency
      Q: Are new or repeat orders driving volume?
      A: Both new guest acquisitions and a rise in existing customer frequency are fueling sales growth, reflecting a balanced volume driver mix.

    9. Advertising Strategy
      Q: Future ad fund and media plans?
      A: Management plans to continue robust investments in live sports and breakthrough creative placements, enhancing overall media efficiency without reallocating dollars from core spend.

    10. International Economics
      Q: What returns do international franchisees see?
      A: International units offer cash-on-cash returns comparable to the U.S., supported by high AUVs nearing $3M, delivering strong economic performance.

    11. G&A Leverage
      Q: How sensitive is G&A to sales changes?
      A: G&A increases are largely incentive-driven, and as sales grow, fixed expenses will yield better leverage and improved profitability.

    12. Cannibalization Risk
      Q: Is there risk of store cannibalization?
      A: Management indicated minimal cannibalization risk, noting that 95% of new openings come from existing brand partners reinvesting in growth.

    13. Media Efficiency
      Q: How does TRP relate to sales growth?
      A: Although traditional TRP metrics aren’t as directly applicable, increased spot buying in live sports continues to efficiently drive broad brand awareness and system sales growth.

    14. Digital Platform Impact
      Q: How is MyWingstop bolstering digital sales?
      A: The MyWingstop tech stack has processed over $2.5B in digital sales, improving guest engagement through personalized content and heightened operational efficiency.

    15. Customer Order Trends
      Q: Any shifts in order frequency?
      A: Despite competitive pressures, order frequency is steady, underpinned by strong quality and value perceptions that continue to attract both new and repeat customers.

    Analyst Coverage

    Research analysts covering Wingstop.