Even as the likes of McDonald's and Starbucks wrestle with slumping sales, business is booming at one fast-food chain. The Dallas-based chicken wing outfit Wingstop, which has been in business for three decades, is positioned to endure “any macro backdrop,” according to Wedbush Securities analysts. Meanwhile, the company is primed for another boost as NFL season—prime wing-eating time—kicks off next month.
Wingstop Inc., which trades on Nasdaq under the ticker WING, remains “uniquely positioned within the industry to deliver transaction growth outperformance over the near-, medium-, and longer-term,” analysts Nick Setyan and Michael Symington wrote in an Aug. 1 note to investors. Wedbush maintained an outperform rating and a 12-month price target of $425. In the past month alone, WING has increased at least 10%, reaching about $406 by Tuesday afternoon.
More broadly, Wingstop has seen its share price climb stock price has increased almost 300% in the past five years.
The analysts also stated that wing-cost volatility is "unequivocally in the rear-view mirror." Strong demand and limited supplies led to “a historic run-up” in wholesale and retail prices for chicken wings during peak times in 2021 and 2022, according to a report by the U.S. Department of Agriculture.
Wholesale chicken wing prices reached a peak of $3.25 per pound in May of 2021, but retail prices continued to climb. “At the start of the 2022 March Madness basketball tournament, the national average retail feature price (prices advertised in grocery flyers) was estimated at $4.29 per pound.” But the costs of chicken wings went down approximately 39% from Super Bowl season in 2022 to the Super Bowl 2023.
What did Wingstop do well to survive the period of volatility? “They used to buy wings on the spot market, so a month out,” Setyan told Fortune. “Now they have longer-term contracts in place for a majority of their wing needs.”
Wingstop Inc. reported on July 31 earnings for its fiscal second quarter ended June 29. The company opened 73 net new restaurants and delivered adjusted Ebitda of $51.8 million, representing a 50.7% growth rate over the prior year. Total revenue increased 45.3% to $155.7 million.
During the quarter, system-wide sales grew by 45%, which provides “additional firepower in our advertising fund,” to invest in expanding brand awareness, Michael Skipworth, Wingstop president and CEO, said on the earnings call. Sports advertising can be a key area as Wingstop enjoys strength from the NFL football season through March Madness basketball.
“I do think sports will continue to help, particularly from a marketing perspective,” Setyan said. As Wingstop continues to buy more ads on during the NFL and NBA seasons, for example, "it should allow them to bridge the branding gap versus [quick-service restaurant] peers," he said.
The company celebrated its 30th anniversary in July. Michael Skipworth, president and CEO, shared his perspective on the earnings call. "Over the last 30 years, not a lot has changed with our brand," Skipworth said. "We added boneless wings, tenders, and the chicken sandwich." The company has remained focused on its "simple operating model" and delivering "cooked-to-order wings, soft and tossed in our bold, distinctive flavors," he said.
