Wingstop defies the fast-food market downturn with a 5-year share price increase of 300% – and the NFL season is just around the corner
While McDonald’s and Starbucks are struggling with declining sales, one fast-food chain is booming. Dallas-based chicken wing maker Wingstop, which has been in business for three decades, is able to weather “any macroeconomic situation,” according to analysts at Wedbush Securities. At the same time, the company is poised for another upswing as the NFL season — prime time for chicken wing eating — begins next month.
Wingstop Inc., which trades on the Nasdaq under the ticker symbol WING, is “uniquely positioned within the industry to deliver above-average transaction growth over the near, medium and long term,” analysts Nick Setyan and Michael Symington wrote in an Aug. 1 note to investors. Wedbush maintained its “outperform” rating and its 12-month price target at $425. In the past month alone, WING has risen at least 10 percent, reaching around $406 on Tuesday afternoon.
In general, Wingstop has seen an increase in its share price, which has risen by almost 300% over the last five years.
The analysts also said that volatility in wing costs is “clearly in the rearview mirror.” Strong demand and limited supplies led to a “historic increase” in wholesale and retail chicken wing prices during peak periods in 2021 and 2022, according to a U.S. Department of Agriculture report.
Wholesale prices for chicken wings peaked at $3.25 per pound in May 2021, but retail prices continued to rise. “At the start of the 2022 March Madness basketball tournament, the national average retail price (prices reported in grocery brochures) was estimated to be $4.29 per pound.” But chicken wing costs dropped about 39% from the 2022 Super Bowl season to the 2023 Super Bowl.
What did Wingstop do well to survive the period of volatility? “They bought wings on the spot market, a month in advance,” Setyan said Assets“They now have longer-term contracts for most of their wing needs.”
Wingstop Inc. reported results on July 31 for the second quarter ended June 29. The company opened 73 new restaurants and reported adjusted EBITDA of $51.8 million, a year-over-year growth rate of 50.7%. Total revenue increased 45.3% to $155.7 million.
During the quarter, systemwide sales increased 45%, which means “additional firepower for our advertising fund” to invest in expanding brand awareness, Wingstop President and CEO Michael Skipworth said on the conference call. Sports advertising can be a key area, as Wingstop benefits greatly from the NFL football season through March Madness basketball.
“I think sports will continue to help, especially from a marketing perspective,” Setyan said. As Wingstop continues to buy more advertising during the NFL and NBA seasons, for example, “it should allow them to close the brand gap with competitors (in the quick-service restaurant space),” he said.
In July, the company celebrated its 30th anniversary. Michael Skipworth, president and CEO, shared his perspective on the event on the conference call. “Our brand hasn’t changed much in the last 30 years,” Skipworth said. “We’ve added boneless wings, tenders and the chicken sandwich.” The company has remained focused on its “simple operating model,” delivering “cooked-to-order wings, soft and with our bold, distinctive flavors,” he said.
This story originally appeared on Fortune.com
