Stock Story -
Fast-food chain Wingstop (NASDAQ:WING) reported results ahead of analysts' expectations in Q1 CY2024, with revenue up 34.1% year on year to $145.8 million. It made a non-GAAP profit of $0.98 per share, improving from its profit of $0.59 per share in the same quarter last year.
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Wingstop (WING) Q1 CY2024 Highlights:
- Revenue: $145.8 million vs analyst estimates of $136 million (7.2% beat)
- EPS (non-GAAP): $0.98 vs analyst estimates of $0.77 (28.1% beat)
- Gross Margin (GAAP): 48.9%, up from 48.2% in the same quarter last year
- Same-Store Sales were up 21.6% year on year
- Store Locations: 2,279 at quarter end, increasing by 283 over the last 12 months
- Market Capitalization: $11.3 billion
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Modern Fast FoodModern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales GrowthWingstop is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 24.9% over the last five years was incredible as it added more dining locations and increased sales at existing, established restaurants.
This quarter, Wingstop reported wonderful year-on-year revenue growth of 34.1%, and its $145.8 million in revenue exceeded Wall Street's estimates by 7.2%. Looking ahead, Wall Street expects sales to grow 17.2% over the next 12 months, a deceleration from this quarter.
Same-Store SalesWingstop's demand has been spectacular for a restaurant business over the last eight quarters. On average, the company has grown its same-store sales by an impressive 13.4% year on year. This performance gives it the confidence to rapidly open new restaurants. When a company has strong demand, more locations should help it reach more customers seeking its meals and boost revenue growth.
In the latest quarter, Wingstop's same-store sales rose 21.6% year on year. This growth was in line with the 20.1% year-on-year increase it posted 12 months ago.
Key Takeaways from Wingstop's Q1 Results
We were impressed by how significantly Wingstop blew past analysts' revenue, gross margin, EBITDA, and EPS expectations this quarter. These beats were driven by its same-store sales growth of 21.6%, which crushed Wall Street's forecast of 12.7%. Management noted most of its growth came from increased transactions, not price, which is very encouraging. The company also opened more restaurants than expected in the quarter, a tailwind for its revenue growth.
Looking ahead, Wingstop's low double-digit same-store sales growth guidance for the full year also exceeded estimates, and it declared a dividend of $0.22 per share, payable on June 7, 2024 to stockholders of record as of May 17, 2024. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is up 2.2% after reporting and currently trades at $393.21 per share.
