Brand benefits from commodity deflation as other companies contend with rising prices
Wingstop Inc. is pulling sales levers like the introduction of a chicken sandwich in September and adding the third-party delivery platform Uber Eats to its DoorDash channel as it enjoys deflation in the price of wings, company executives said Thursday.
The Addison, Texas-based company, which released its earnings for the second quarter ended June 25, saw its domestic same-store sales decline 3.3% in the quarter as the company lapped last year’s government stimulus.
Michael Skipworth, Wingstop CEO and president, said on an earnings call Thursday that Wingstop saw dine-in trends pressure its heavy off-premises sales and it reopened all of its dining rooms and offered value options.
“Acknowledging that the lower-income consumer would be focused on seeking value when pursuing restaurant occasions,” Skipworth noted, “early in the second quarter we launched the Boneless Meal Deal — a bundle consisting of 20 boneless wings, four flavors, two dips, a large fry, all for only $15.99.”
Skipworth called it a “a compelling value,” and it is the highest mixing bundle launched by Wingstop and made up about 7% of the sales mix in the quarter. It appealed to the “indulgent” occasion, he added.
Wingstop maintained its sales guidance for the year, saying full-year domestic same-store sales growth would be in the low single digits.
Skipworth said levers the brand is pulling in the second half of the year, besides value, would be its addition of Uber Eats delivery nationwide, increased marketing dollars and the introduction of the recently tested chicken sandwich systemwide in September.
Of the UberEats introduction systemwide over the past few weeks, he said, “We have known for a while this would be a sales-driving lever for us.” The company tested the platform in some restaurants in addition to the existing DoorDash offering.
“We have seen the lift it provided other brands who have made this move in the past,” Skipworth said. “While it's only a couple weeks into the UberEats national launch and without any advertising support, we are encouraged by the early results.”
Skipworth said Wingstop also was planning to deploy marketing dollars from its national advertising fund.
“As we look to the balance of the year,” he said, “we expect an increase of over 35% in the amount of ad dollars to be invested providing us with the firepower to drive top of mind awareness and consideration as consumers become more discerning with their dining.”
In early September, Wingstop plans to introduce systemwide the chicken sandwich it tested at 60 restaurants in four markets in May.
The sandwich in that test achieved about 4% of sales, reaching internal targets, Skipworth said, and was popular during the lunch daypart.
“What we are really encouraged by is that these chicken sandwich occasions were highly incremental and mixed very nicely,” he said.
For the second quarter ended June 25, Wingstop’s net income was $13.3 million, or 44 cents per share, up from $11.3 million, or 38 cents per share, in the same period a year ago. Revenues were up 13.2% to $83.8 million, from $74 million in the prior-year quarter.
As of June 25, Wingstop, founded in 1994, owned and franchised more than 1,858 locations worldwide. That included 1,639 in the United States (of which 1,600 were franchised and 39 company-owned) and 219 franchised restaurants in international markets.
For 2020, Wingstop plans to open between 220 and 235 net new restaurants, which would be a growth rate of about 13% for the year.
The company opened 67 net new restaurants in the second quarter. The company opened its first restaurant in Canada, one in Toronto, and has a development deal for South Korea, which it sees as a step into the Asian international market.
Contact Ron Ruggless at [email protected]
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