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Restaurant Chain Boosts Same-Store Sales by 6.9% in Q3
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Shares of Wingstop Inc. traded 15% higher yesterday after the company reported that during Q3/22, it opened 40 net new restaurants and increased its system-wide sales by 17.7%. In addition, the company raised its FY/22 earnings guidance.

Global fast-casual restaurant chain Wingstop Inc. (WING:NASDAQ), which franchises and operates around 1,900 restaurants in nine countries worldwide, today announced financial results for Q3/22 ended September 24, 2022.

The company reported that during Q3/22, system-wide sales increased by 17.7% to US$699.6 million, compared to US$594.3 million in Q3/21. The firm noted that in the same period, U.S. same-store sales increased 6.9%, and the domestic average unit volume in Q3/22 was US$1.6 million, with digital sales comprising approximately 62.0% of all sales.

Wingstop stated that at the corporate level, total revenue in Q3/22 increased to US$92.7 million, up from US$65.8 million in Q3/21. This included royalty revenue and franchise fees of US$40.4 million, advertising fees of US$32.1 million, and company-owned restaurant sales revenue of US$20.2 million.

The firm indicated that royalty revenue, franchise fees, and the other category increased by US$7.5 million year-over-year due to the addition of 215 net new franchise restaurants during the last 12 months and previously the mentioned 6.9% growth in same-store sales.

Wingstop advised that net income in Q3/22 increased by 18.4% to US$13.4 million, or US$0.45 per diluted share, versus US$11.3 million, or US$0.38 per diluted share in Q3/21.

The company also saw a US$16.6 million increase in advertising fee revenues after it raised its national advertising fund contribution rate to 5% from 4% at the beginning of Q2/22.

Wingstop stated that its company-owned restaurant sales were up by US$2.8 million due to the addition of nine new company-owned restaurants and a 4.3% increase in company-owned same-store sales due to an increased number of customer transactions and higher menu prices.

Wingstop advised that net income in Q3/22 increased by 18.4% to US$13.4 million, or US$0.45 per diluted share, versus US$11.3 million, or US$0.38 per diluted share in Q3/21.

The firm added that on a non-GAAP basis, adjusted net income during Q3/22 increased by 57.9% to US$13.6 million, or US$0.45 per diluted share, compared to US$8.6 million, or US$0.29 per diluted share in Q3/21. The company added that adjusted EBITDA in the latest quarter rose 32.7% to US$28.4 million, versus US$21.4 million in the prior year's corresponding quarter.

Wingstop's President and CEO, Michael Skipworth, remarked, "The third quarter results underscore the strength of our long-term growth strategies and the growth levers we have to pull as a brand. We delivered 6.9% domestic same-store sales growth, with the majority of this growth driven by an increase in transactions, a demonstration of the momentum and underlying health of our business. This translates to 36.2% domestic same-store sales growth on a three-year basis."

"We've opened 167 net new restaurants through the third quarter and are on track to have a record year for restaurant development, enabled by significant bone-in wing deflation strengthening our brand partners' unit economics. This gives us confidence in our ability to deliver another record-setting year for Wingstop," Skipworth added.

The company advised that it is raising its forward earnings guidance and that for FY/22, it expects diluted earnings per share (EPS) of US$1.61-1.63. The firm's prior estimates called for diluted EPS of US$1.55-1.57.

Wingstop added that for FY/22, it anticipates that domestic same-store sales growth will be in the low-single digits. The company stated that for FY/22, it expects to add 225–235 net new system-wide restaurant openings, which it said is up on the low end of the range from its previous plans for 220–235 net openings.

The company noted that during Q3/22, it added 40 net Wingstop restaurant locations bringing the total number of units system-wide to 1,898. Of these, 1,673 were in the U.S., and 225 were franchised restaurants in international markets. The firm indicated that 1,631 of the Wingstop restaurants operating in the U.S. are franchised, and the remaining 42 are company-owned.

The firm stated that in FY/21, it recorded total system-wide sales revenue of around US$2.3 billion.

The firm indicated that its Board of Directors has authorized payment of US$0.19 per share dividend to its common shareholders of record as of November 11, 2022. The quarterly dividend is scheduled to be paid on December 2, 2022.

Wingstop is based in Dallas, Texas, and operates and franchises 1,898 locations worldwide. In addition to its many U.S. locations, the firm has locations in eight other countries, including Canada, France, Indonesia, Mexico, Singapore, Spain, UAE, and the U.K.

The company's signature offerings include its classic and boneless chicken wings, chicken tenders, and chicken sandwiches which are made to order and hand sauced-and-tossed with the customers' choice of 11 flavors. The company also offers accompanying side dishes of its freshly cut seasoned fries and its signature ranch and bleu cheese dips.

The firm stated that in FY/21, it recorded total system-wide sales revenue of around US$2.3 billion. While the firm does own and operate some locations, approximately 98% of its locations are owned by its brand partners and independent franchisees. The firm listed that for the year 2021, it was ranked first on Technomic 500's 'Fastest Growing Franchise' list.

Wingstop started yesterday with a market cap of around US$4.03 billion, with approximately 29.91 million shares outstanding and a short interest of about 12.0%. WING shares opened 15% higher yesterday at US$155.00 (+$20.15, +14.94%) over Tuesday's US$134.85 closing price. The stock traded yesterday between US$145.29 and US$164.71 per share and closed for trading at US$155.45 (+$20.60, +15.28%).

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1) Stephen Hytha wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.

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