Q2 2023 Wingstop Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by.
Welcome to the Wingstop, Inc. Fiscal second quarter 2023 earnings conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Please note that this conference is being recorded today Wednesday August 2nd 2023.
On the call today are Michael Skipworth, President and Chief Executive Officer, and hours Colada, Senior Vice President and Chief Financial Officer.
I'd now like to turn the conference over to Alex. Please go ahead. Thank.
Thank you and welcome to the fiscal second quarter 2023 earnings conference call for Wingstop.
Our results were published earlier this morning and are available on our Investor Relations website at IR Dot Wingstop dotcom.
Our discussion today includes forward looking statements.
These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from our what we currently expect.
Our SEC filings describe various risks that could affect our future operating results and financial condition.
We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance present.
Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Conciliations the comparable GAAP measures are contained in our earnings release.
Lastly for the Q&A session. We ask that you. Please each keep to one question and a follow up to allow as many participants as possible to ask a question.
With that I would like to turn the call over to Michael.
Yeah.
Good morning, and thank you for joining our call.
Our second quarter results showcase the underlying strength of the Wingstop brand and the staying power of our strategy.
Our results would not have been possible without the incredible work by our team members and the global support center. The restaurant team members, our supplier partners and our brand partners, who work tirelessly each day to serve the world flavor.
We delivered another industry, leading quarter led by 16, 8% domestic same store sales grow <unk>.
Consistent with the underlying strength in our brand we saw in the first quarter substantially all of our comp in Q2 was driven by transaction growth.
Within our sales growth we saw further expansion in our digital channel achieving a record of 65, 2% digital sales mix for the quarter.
We opened 50 net new units during the quarter. This pace of development and same store sales growth translated to system wide sales growth of 27, 8% in the quarter.
Adjusted EBITDA totaled $34.4 million, an increase of 47% versus the prior year high.
Highlighting the strength of our asset light model.
Our unit economics are near our historical highs and we have an energized base of brand partners.
We are extremely excited by the strength, we are seeing in our development pipeline positioning us for a record year across the dominant metrics, whether it be our development agreement sales site approvals and new restaurant openings.
We are also making great progress increasing brand health metrics.
We hit record highs across brand awareness purchase consideration and intent as well as media related perception metrics that include positive buzz word of mouth and likelihood to recommend and we are also seeing positive trends in value scores with guests in an environment, where many brands are measuring.
Decline.
While we are encouraged by the progress we are making we continue to see sustainable growth in front of us when we benchmark Wingstop brand awareness to other national brands.
The roughly 30% growth we've seen in system wide sales during the first half of the year gives us the firepower in our National AD fund to continue chipping away at this opportunity.
In our 19 consecutive years of same store sales growth, we have a proven playbook and our multi year strategy that we are working and we continue to execute against we believe our sales strategies provide us with a clear line of sight to growing <unk> north of $2 million.
Our strategy remains consistent and clear.
Building brand awareness menu innovation, expanding our delivery channel digital transformation and data driven marketing.
One of the strategies, we've talked about over the years is to broaden the top of the funnel by targeting heavy choose our users a group that represents over 60% of all <unk> visit and is either not heard of or not tried wingstop.
We're excited by the progress we continue to make against this meaningful opportunity and are bringing a lot of new guests that are experiencing wingstop for the first time.
These new guests that are coming into wingstop tend to be gen Z or millennials multicultural Techforward party size of two or more and willing to spend a little more for quality or indulgence. The profile of the heavy <unk> user. While we are encouraged by the progress we are making and the tremendous momentum we have in.
The brand there remains a significant awareness opportunity, helping pure continued sales growth.
The progress we are seeing an expanding brand awareness will be further bolstered by the launch of our new creative campaign, our first in more than three years, coinciding with the start of football season.
This new creative combined with our growing AD fund will allow us to continue closing our gap and brand awareness with breakthrough creative along with Wingstop showing up in more premium placements focused on live sports and.
And to help us continue to execute our proven strategy I couldnt be more excited about the addition of our new Chief growth Officer, and Fisher her experience will position us to advance our best in class technology platform and allow us to further unlock our growing first party digital database as we work towards our <unk>.
Aspirational goal of digitizing every transaction.
Another sales driver on our path to $2 million plus <unk> is the expansion of our delivery channel, where we see the potential to nearly double our channel mix.
In July of last year, we launched our second delivery provider for the entire domestic system.
The addition of Uber eats has allowed us to access a new gas that's proven to be highly incremental and we see the two delivery marketplaces as another avenue to build awareness.
Benchmark suggests delivery sales mix can be north of 50% today, we sit at approximately 30% delivery mix in the system.
And reflecting on our first year of expanding to an additional delivery provider. We continue to see a substantial opportunity ahead.
We have lapped the launch of Uber eats in July of last year, and we are encouraged by the results. We see we have commented over the last few quarters that we continue to see growth with both door dash and Uber eats delivery channels and we see continued growth in front of us within these channels.
In addition to delivery our chicken sandwich innovation continues to be a sells lever oh and by the way I'm sure. Many of you by now have tried at least one of our 12 chicken sandwiches.
But yet we are only scratching the surface on the opportunity with more than $2 8 billion chicken sandwich surgeries annually in the U S. We are looking to capture our fair share of the category.
This strategy is broader than just winning our fair share. It is also about broadening how consumers view wingstop. It presents us with the opportunity to capture more occasions beyond that indulgent wing occasion.
Which we believe can ultimately impact frequency and presents a huge opportunity for us over the long term.
When he stopped chicken sandwiches provide another access point for the brand among new consumers and introduces our differentiating flavors and quality our core fans have.
Well enjoyed over the years.
Another benefit we have seen as we bring in new guests into the brand through chicken Sandwich is a halo effect on our core wing business as guests learn to navigate the rest of the menu something we believe just further strengthens our unique position.
[noise] chicken sandwiches also helped advance our supply chain strategy, the combination of increasing our utilization of breast meat and our size and scale has positioned us to make meaningful progress towards our goal of minimizing volatility we see in food costs.
As we sit here today, the majority of our chicken repurchase does not directly tied to the week to week volatility that is seen in the spot market. This is a fundamental shift in our model and it is helping us mitigate the volatility we have historically seen in food costs.
As we continue to win more chicken sandwich occasions, we see a path to 50% plus boneless mix, which we believe could result in a structural change to our long term food cost target potentially yielding cogs in the low 30% range and further enhancing our best in class unit economics.
These multi yourselves drivers that we are executing against have combined to drive significant transaction growth and gives us confidence in achieving our targeted adv in excess of $2 million.
Our supply chain strategy and growth in <unk> have strengthened unit economics.
The average investment to open at Wingstop is still a relatively modest $450000 and with the system and <unk> of $1 $7 million brand partners aren't seeing a payback in less than two years, our brand partners recognize the staying power of our strategies and the strength of our unit economics, which is supported.
By the fact that over 90% of new restaurant openings come from existing brand partners reinvesting back into the brand a strong statement supporting our best in class returns and translates into significant demand for growth.
Brand partners are motivated and excited to grow their wingstop footprint as we continue to see our pipeline strengthen.
Not only for new site approvals, but also for new development agreements, giving us confidence in our path to achieve our long term goal of <unk>.
7000, plus global restaurants.
You've heard me say that we believe our international business is well positioned for growth during the first half we saw an acceleration in international same store sales growth and the investments we've been making and the team are paying off with.
We signed two new markets during the quarter, Netherlands in Puerto Rico, which fit perfectly within the regional expansion strategy. We have discussed over the years, we're growing our footprint in our newest markets, Canada and Korea, while <unk> are accelerating.
The business development pipeline remains strong and I'm excited about the momentum that is building in our international business.
As we sit here today, the consumer is proving to be more resilient than what many of us might have expected to start the year.
Whether it is continued inflation rising interest rates or even the restart of student loan payments later this year.
We acknowledge the macro backdrop continues to have a fair amount of uncertain. However, despite the uncertainty ahead. We believe we are well positioned to deliver another industry leading here in the second quarter. We opened our 2000 global restaurants, our system sales have surged past.
$3 billion on a trailing 12 month basis through June which is nearly double when comparing to just three years ago. During the same time period.
This is a direct reflection that our multiyear strategies are working and showcases the underlying momentum in the brand.
It's also what gives us confidence to raise our full year 2023 outlook on domestic same store sales growth from high single digits to 10% to 12% range with our sights clearly set on delivering an industry, leading 20th consecutive year of same store sales growth.
In addition, with the visibility that we have in our construction pipeline. We are updating our development outlook from approximately 240 net new units to between 240, and 250 net new units, which would translate to a record number of net new units opened in a year for wingstop.
Before I hand, it over to Alex I wanted to share some exciting news on the ESG front.
A key focus area in our ESG efforts is getting back to the communities in which we serve.
Our wingstop charities mission is to amplify the flavor of our communities through service, while focused on environment education sports food and entrepreneurship.
In December of 2022 we launched Roundup a program in which our guests have the ability to round up their digital checks to the nearest dollar to donate to wingstop charities.
This provides an opportunity to partner with more organizations in need of support.
I'm excited to announce that in the third quarter Wingstop charities is partnering with no Kid hungry.
100% of the Roundup contributions made between August 1st in September 30th will go to support this terrific organization.
No Kid hungry is an organization that is changing the way that schools and communities ensure you have the food they need to learn grow and succeed their mission its end childhood hunger and to help ensure every single child in America has the food they need to grow up healthy and strong I'm thrilled with our efforts and the opportunities to have.
And even greater impact in the communities we serve.
At the foundation of our strategies is people and our culture, which we referred to as the Wingstop way.
We believe these are competitive advantages for us and as we look ahead to the second half of 2023 I'm excited by how the Wingstop team is positioned to deliver another industry, leading year with that I'd like to turn the call over to Alex.
Thank you Michael.
The second quarter continued to demonstrate the strength of our long term strategies, we delivered 27, 8% growth in system wide sales in the second quarter, which as you heard Michael mentioned now exceed $3 billion.
Total revenue increased to $107.2 million from $83 $8 million in the prior year fiscal second quarter.
Royalty revenues franchise fees and other revenue increased by $11 9 million in Q2, driven primarily by 182 franchise restaurant openings since the prior year comparable period.
A 16, 8% increase in domestic same store sales.
Which was driven almost entirely by transaction growth.
Company owned restaurant sales totaled $22 $6 million in Q2, an increase of $3 $8 million, primarily due to a five 7% increase in company owned same store sales driven by transaction growth.
And six net new restaurants versus the prior year comparable period.
Cost of sales as a percentage of company owned restaurant sales improved by more than 580 basis points compared to the prior year, mainly driven by a reduction in the food beverage and packaging costs, which included a nearly 40% decrease in the cost of bone in wings.
Our supply chain strategy is to mitigate volatility and our food cost.
Component of our strategy, where we've made a lot of progress is around shifting more of our buy from the spot market.
Just on the progress we are making against our supply chain strategy and leading indicators for our core commodities, we enter the second half of the year with greater predictability and we continue to have line of sight to a food cost for 2023 in the low 30% range.
And consistent with our outlook last quarter, we anticipate company owned restaurant cost of sales to be approximately 75%.
With the progress, we're making on our supply chain strategy.
Visibility into food cost extends beyond 2023, and is generating quite a bit of excitement among our brand partners as unit economics have strengthened to near record levels.
In the second quarter, SG&A totaled $22 $1 million, an increase of $8 $2 million versus the prior year comparable period.
This quarter lap the significant stock award forfeiture last year and in the current quarter included investments in head count and strategic projects to support the long term growth of the business as well as an increase in performance based stock and incentive compensation as a result of our performance.
Adjusted EBITDA, a non-GAAP measure was $34 $4 million during the quarter, an increase of 47% versus the prior year.
Adjusting for nonrecurring items, we delivered adjusted earnings per diluted share and non-GAAP measure of 57.
A 27% increase versus the prior year.
Our highly franchised asset light model continues to deliver strong free cash flows.
As of the end of the second quarter, we had $521 million and net debt.
Our net debt to trailing 12 months adjusted EBITDA was at four times, which is a half a turn lower than at the end of the fourth quarter underscoring our ability to quickly delever through a combination of adjusted EBITDA growth and strong free cash flow generation.
We are maintaining a strong cash balances stands at approximately $200 million.
And we believe puts us in a position of strength as we enter the back half of this year.
A component of our return of capital strategy is through our regular quarterly dividend, which is targeted at approximately 40% of free cash flow.
Our board of directors today approved a 16% increase in our quarterly dividend <unk> 22 cents per share of common stock, resulting in a total dividend value of $6 $6 million.
This dividend will be paid on September eight 2023 to stockholders of record as of August 18th 2023.
Now moving onto our outlook for 2023.
With the strong start to the year, we now anticipate domestic same store sales growth of 10% to 12% for full year 2023, an increase from high single digits.
Based on the visibility we have in our pipeline, we are raising our development outlook to a range of 240 to 250 net new units.
Consistent with our prior comments, we also anticipate our pace of openings to be weighted more towards the fourth quarter.
SG&A guidance is estimated to be between 91, and $93 million, including $3 $9 million and nonrecurring consulting projects to support our strategic initiatives and an estimated $14 million to $15 million of stock based compensation expense, which was <unk>.
Increased from $12 million to $13 million due to the performance of the business.
For modeling purposes, we anticipate SG&A in the second half will be evenly split between the two quarters.
Our strategy has remained consistent and we are focused on execution, which is evident with the strong start in the first half of the year.
Our multi year growth strategies, a unique part of the story for Wingstop have staying power and give us the confidence in delivering upon our increased outlook for 2023.
I want to thank our team members supplier partners and brand partners for all their hard work and dedication to deliver best in class experience for our guests.
With that I'd like to now turn to Q&A operator, Please open the line for questions.
Thank you well now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad.
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Today's first question comes from David Tarantino with Baird. Please go ahead.
Hi, good morning, and congratulations on great results.
My question is on the on the comp trends that you're seeing and you know clearly still very strong on an absolute basis thing. Thank you too but it.
It was a little lower than in Q1, so I wanted to ask how you're viewing that change in the business from Q1 to Q2 and whether whether you think it's an underlying deceleration or not you know doing you know what I know, it's kind of tough for us of how we're doing all of the noise in the the comparisons related to.
The sort of Covid. So I guess, how are you viewing the business trend you know kind of Q1 to Q2.
Hey, David Good morning, and thank you for the question you know I think as we as we think about the comp that we delivered in.
In Q2, it's something we're obviously extremely proud about particularly when it speaks to the underlying momentum and strength of the brand to deliver a comp of 16, 8%, which it has been substantially driven by transaction growth.
Makes a lot to the effectiveness of our strategies that we're executing against and just the overall health of the brand I think you heard us in our prepared remarks talk about whether it's from brand health metrics, where we're setting record levels for the brand and seeing really strong improvement and then when you look at some of the metrics around value.
As an example, where we're showing in measuring really great progress and improvements in value scores. When the industry is measuring declines and so I think it really differentiates our position, but as we think about the quarter.
I think obviously, we talked about this.
In prior quarters, what we saw a a bit of a perfect storm hit our hit our business in in.
In April of last year, but then we moved quickly and.
And deployed or leaned into our proven playbook, our value playbook and was able to reverse that trend pretty quickly. So the compares did get a little bit more challenging as we moved through the quarter and not nearly as easy as what we lapped in April but I think overall, we feel really good about where we stand in the trends there.
We're seeing in the business I think if we take a step back I can remember just about a year ago, we were celebrating achieving $1 $5 billion <unk> for the brand and then at that point in time, we shared a broader strategy that showed us what we believe is the the growth levers we can execute against.
To scale these north of $2 million and fast forward to today, and where we're already up over $1 7 million and so as we as we think about the unit economics and the strength that we're seeing there and how that's feeding into.
A significant amount of demand with brand partners, we're really encouraged by the underlying momentum we see.
Great and just a just a follow up to that my God you know I think.
One thing that's on investors' minds is how you lap those big performance you've seen in the first half of this year, So I guess.
What are your thoughts on on you know.
Being able to maintain kind of positive momentum on top of what you've.
CN recently as you think about the next four quarters playing out.
Yeah no. Another thank you David and another good question and I think its something were actually really confident in because as we think about the sales levers that we're executing against whether it's continuing to grow brand awareness, whether it's through menu innovation and capturing new occasions through chicken sandwich and as we mentioned in our prepared remarks.
Seeing that Halo effect on the rest of our business as these new guests come in through a very familiar an easy entry point, a chicken sandwich and are able to navigate the rest of the menu or the expansion of delivery, where we mentioned it's at 30% today, but we still see an opportunity.
We benchmark ourselves to other more mature heavy off premise brands and opportunity to almost double that channel mix and then obviously continued digital expansion and then leveraging our first party data and so all of these things give us a lot of confidence in our ability to continue to grow as these.
And and sustain continued sales growth and deliver on our long term algorithm and I think what's unique about our story is these arent L T OS or onetime.
Sales and benefits these aren't new sales layers that we continued to build upon and I can remember answering the same question.
A couple of years ago, when we saw extensive growth in our business from the pandemic and we talked about that just simply being a pull forward of growth and we were able to build on top of some and comp on top of some pretty incredible numbers back then and we don't see think next year will be any different.
Right. Thank you very much.
Thank you. Thank you.
And our next question today comes from Jeffrey Bernstein with Barclays. Please go ahead.
Thank you very much.
First question is just on the unit growth you raised your opening target modestly for 'twenty three now it looks like 12% to 13% growth I'm. Just wondering if you could talk about maybe where the incremental growth is coming from whether by geography or by presumably a lot more existing franchisees.
Reason to believe that the 2024 year will see any kind of slowdown in growth. If we were to see a tougher macro or your line of sight pretty strong that.
The 10% is the base, but you have demand to to exceed that going into 'twenty, four where maybe the macro might be a little bit more challenged and then I had one follow up.
Thank you, Jeff and good morning.
We're we're definitely bullish about development for this year in particular and what we're encouraged by is it's balanced it's balanced it through fortress markets non fortress markets and again you did mention it but it is the majority of our development coming from existing brand partners that are reinvesting in them.
R&D.
We mentioned it in our prepared remarks, but there's there's a significant amount of demand and excitement from from our brand partner community to continue to grow we're seeing our pipeline of sold restaurant commitments.
For next year continue to build very nicely and in addition to that we continue to see a really strong steady flow of sites coming in to be approved.
Given us a lot of confidence in continuing to be able to expand our footprint and I think for us a lot of that centers around the progress that we've made obviously driving topline, but probably equally as important is continuing to advance our supply chain strategy, where we've been able to move more and more of our buy away.
From the spot market and how we structure some of the agreements with our supplier partners and that's enabling us to provide a lot more predictability and ultimately.
What our supply chain strategy as stated is to minimize the volatility that we see in food cost and so we feel really good about.
How that's coming together the progress that we're making I think as you heard in Alex's comments.
Our prepared remarks, reiterating what we told you last quarter around our.
Cost of sales margins for our company restaurants, I think it's a good indication.
Understood and.
And then the follow up is really on and not something that necessarily mentioned in your prepared remarks, but our AI, which I know from recent conversations it sounds like you are.
Testing AI and I think you are 40, or so company operated units in Dallas I know that region still gets a fair amount of orders over the phone. So I'm just wondering.
Can share any early feedback maybe on benefits of the shift to digital or other potential AI opportunities obviously.
The sector, where that is getting a fair amount of discussion I know you guys tend to be on the forefront from a technology perspective, so any color on the AI test or future opportunities would be great. Thank you.
Yeah. Thank you, Jeff where we're really excited about this AI solution that we've expanded the test on as it relates to intercepting phone orders, which still represents roughly 15% of ourselves today and so as we think about our digital sales mix, which we mentioned for Q2 was that a.
Record 65, 2%, we see a ton of runway to continue to expand our digital sales mix and I think when you. When you look at the overall industry and you've seen consumers revert back to pre pandemic behaviors, you're seeing digital sales mix for a lot of brands go the other direction and where we're continuing to.
Span and we think this this AI solution is a great catalyst for further expansion, where we enjoy and benefit from a higher average check, but what we've seen and the additional restaurants that will be expanded to it was pretty consistent with what we mentioned last quarter and that is it's it's it's kept we think it's capturing.
More calls that were previously missed its offering a better guest experience and then obviously if the team members not.
On the phone well well test, yes, theyre at the counter picking up an order and having to manage both of those things at the same time. It provides a better team member experience and so we're really excited about the progress we're seeing within the test and the opportunity we have in front of us to lean in and leverage AI.
Thank you.
Thank you.
And our next question today comes from Andrew Charles.
Please go ahead.
Thank you I had two questions for Alex first one interrupted thoughts on accelerating cash return to shareholders last March to fortify the balance sheet with about $130 million of unrestricted cash as you pursued the supplier strategy and your own pace them. This year with less than four times net debt to EBITDA. So curious what do you need to see to Axa.
Cash returns to shareholders.
And how would you think this is more likely to be executed through releasing that excess cash on the balance sheet or went through perhaps a dividend recap.
Good morning, Andrew.
Great question consistent with our comments, we made in the prior quarter, we intended to enter the second half in a position of strength with our balance sheet.
So we are set up to be opportunistic with this cash which could include a return of capital.
And we are having regular dialogue with our board on how to best optimize our return of capital strategy.
So you know I think you've seen that cadence from us over the years.
Around that.
You know every 18 months window and.
We also obviously deploying the cash and move our leverage up a bit but we're also comfortable at a little higher leverage than where we're at today to your point.
Great and then my follow up question's on bone in wing prices I think you said bone in wings are continue to be benign in the back half of the year and then you have line of sight to 'twenty 'twenty four and so wondering can you expand more on that what are the early indicators for 2020 for wing costs.
That helps lead to or helping to lead to a record store level cash flows in 2023, I know Michael last call you talked about obviously beef inflation is going to eat chicken suppliers increased production increased supply that settled a thought for 2024.
Yeah. Andrew This is something we're really excited about and our brand partners as well you know I think this is the first year starting earlier in the year, we've been able to articulate where we see our our food cost in that low 30% range for the year and that's a function of what Michael mentioned on the call.
Moving more of our buy off the spot market and while we do watch the market or less relying on that week to week by because of the way we've been able to introduce a different pricing arrangements with our suppliers and for the first time frankly in years.
In our history, we've been able to lean into 'twenty 'twenty four is well deploying this strategy of mitigating volatility and our food cost and so it's more about.
It's less about the market dynamics are more about where those where our strategy is leading us.
Into the following year.
That's great. Thanks, so much.
Thank you and our next question today comes from Joshua Long with Stephens. Please go ahead.
Great. Thank you for taking my question when thinking about the unit development pipeline, Michael I think you mentioned the ongoing strength in the fact that continues to build globally was curious if you could quantify what that pipeline looks like and I think in prior calls we have been you had built something along the lines of 1200 units, but just curious if you could add an additional layer of texture on.
And then.
Secondarily, just within the current environment, just what that development backdrop looks like obviously you were able to take up the.
Development range for the year, which is exciting but curious what the cause your brand partners and what you are facing in terms of either permitting or supply chain headwinds.
Headwinds in the current environment.
Hey, Josh Thank you for the question.
We mentioned it on the call we were trending towards record levels and just about every metric across development whether that's.
Our D. R D. A commitment sales whether its sites approved or obviously based on our guide for the balance of the year 2023 is shaping up to be a record year of new restaurant openings and that pipeline continues to build and so I think a lot of that has to do with some of my prior comments I made around just the strengthened.
The unit economics that our brand partners see the staying power of these these sales drivers that we're executing against and then as we mentioned earlier the progress that we're making against our supply chain strategy, that's providing more.
More predictability and mitigating the risk around volatility that we see in food costs and so we're we're pretty encouraged by that progress and obviously our brand partners are really excited about it and I think another thing that we're really excited about is.
We talked about last year's vintage of new restaurants that came in it at $1.3 million on average and those restaurants today are comping strong I think that's something we've demonstrated consistently over the years that our restaurants come out of the gates strong and then just build from there another unique.
Element to our growth story, and then as we look at the restaurants that we opened this year, they actually coming out of the gates and trimming that at above $1 3 million, which again further the excitement that we see from our brand partners and I think ultimately fuels that development, we talked about.
That's very helpful. Thank you.
As a follow up when we think about the momentum behind chicken sandwich and the opportunity to bring new guests into the brand through that funnel that you mentioned a lot of work there and still more.
More work to be done for sure, but can you talk about what you've seen thus far in terms of how you engage with guests when they entered the system.
How they start to explore the menu and what kind of what that wingstop journeys for them. It seems like theres an opportunity to support some of that boneless.
The mix that you talked about and then perhaps you can kind of your core.
<unk> heritage bone in specialty as well, but just curious what you've learned with them and how they communicate with you all as they've gone into the system.
Yeah, It's a great question and something that we're pretty pretty excited about I think feeds into the overall confidence that we have is that these new guests that are coming in they're very familiar and understand how to engage with brands with a chicken sandwich, where maybe historically they've only thought of wings is a special occasion.
Whether it would be Super Bowl or some other group gathering and and as they come in we are seeing them navigate the rest of the menu.
And I think that is what's translating to a pretty unique situation, where this comp growth that we're talking about in the in the.
The transaction growth that we're seeing it's pretty consistent across day parts, it's pretty consistent across channel and and we're pretty excited about just seeing this overall, what we call Halo effect to the rest of the menu, but one of the data points I'll share with you that really highlights the progress that we're making is as we exited.
Q2, our boneless mix was the highest its ever been at 43%. So we talk about not only can this this new guests come in through chicken sandwich and provide an overall benefit to the to the menu, we see that as continuing to build confidence around driving boneless mix long term north of 50.
80%, which could structurally change kind of our overall food target, which typically as you know mid thirty's, we could actually see that moved down to something in the low 30 range, which is pretty exciting when you think about combining that with the AED growth that we're delivering really strengthens US you had an economic sense feeds that.
That long term growth story, which is which is really exciting. When you think we just eclipsed 2000 restaurants and have an opportunity in front of us to scale. This brand in north of 7000.
Thank you.
Thank you and our next question today comes from Jon Tower of Citi. Please go ahead.
Great. Thanks, I was actually maybe even just following up to that last point on the traffic growth is there any way you could break down the traffic growth that you're seeing between new customers versus say building frequency from existing customers based on the data that you have today.
I mean, I'm sure we could get to that.
What we're seeing though and I think as what's really encouraging as these new customers that are coming in are moving up the frequency curve and that's exactly what we want to see and we talked about chicken sandwich, where it's it is a little bit more of a different occasion than our typical wing occasion and it does over index towards lunch.
So I did mention the comp was pretty consistent anyway, you cut it but it was stronger over that lunch day, part, which I think we'd like to see.
And see a lot of opportunity there to continue to grow but.
We talk about our chicken sandwich mix, it's still mixing in that mid single digit range, but the fact that we're seeing growth in all areas of the business, we think a better way to look at it and how we measure it is actually in quantity of sandwiches sold per restaurant per week, and we sold more sandwiches in Q.
Two than Q1, which is encouraging as we think about the back half of the year.
Got it thank you and just.
I know, it's something that you have.
Kind of.
Not wanted to pursue in the past, but the idea of a rewards program. Our loyalty program curious to get your updated thinking you're obviously, you've got a high digital mix of.
Customers and clearly driving quite a bit of traffic these days, but thinking about this business over the longer term. It's it's you know when you look across the rest of the landscape. It appears that loyalty has worked relatively well for quite a few brands, particularly within the the limited service space. So curious to get your updated thoughts there if anything.
Changed.
Yeah, I think you know what's in the other thing that's pretty unique about wingstop as we've built this database a 35 million users strong and we've done that without without a loyalty program, which is which is pretty incredible. If you think about the opportunity we have in front of us.
But we continue to make progress against this roughly $50 million of investment, we're making in our own proprietary tech stack and we think that will be.
An enabler that's going to allow us to really leverage this first party data to personalize that that customer journey.
And get a little bit a lot more targeted with with with how we engage with guests that we think will help further drive digital expansion and then obviously as we progressed and we know that it could be a lever for us down the road as we aspire to digitize every transaction, we could engage with guests in some form.
<unk> of them.
Early early access maybe secret menu some way to specialize the experience for our guests that are signed up with a program with wingstop.
Got it thank you.
Welcome.
And our next question today comes from Andy Barish with Jefferies. Please go ahead.
Hey, guys.
A quick one and kind of Flushing out. The guide you know 10 to 12 on the same store sales, obviously, the math implies low to mid single digits for the.
For the back half of the year.
Are you willing to kind of give us sort of as you like.
<unk> and then have the chicken sandwich slap in front of us sort of.
Where things are today or kind of where your.
Where you're pointing to.
Within that that guidance range at this point.
Hey, Andy.
Yeah, absolutely I think a good way to think about it and we've shared this I think in prior quarters is when we launched Uber eats we saw call it roughly.
Our mid single digit sales mix.
Through that through that platform and we've talked over the quarters about continued growth in <unk> in Q2 kind of our exit rate. If you will that that channel mix through Uber eats platform was roughly double where it was when we launched and so that gives us a lot of confidence in our ability to to lap.
That in and really what we alluded to in our prepared.
Third remarks, and so I think chicken sandwiches is really no different in that we are selling more sandwiches and we continue to see this overall halo effect to the rest of our business and you couple that with our growing AD fund increased media. This new creative that we have coming around football season.
We're entering the back half of the year with with confidence, but obviously like most other brands. There is there still that overall uncertainty. That's that's in the macro backdrop that that everybody has to kind of navigate measure.
Got it. Thank you and then just just quickly on the consulting fees or fees that are running through the G&A. This year can you give us a little color on where that is I imagine some of it is looking at China again, but then anything else like that.
That you'd care to call out.
Yeah, Andy I think I think over the years we've.
We've been a brand or we've demonstrated that.
When we see an opportunity to put our foot on the gas and drive growth that's exactly what we do and so as we think this work and kind of.
The consulting fees here are really centered around strengthening our category one position and just further bolstering our strategy for us to execute on this next phase of growth.
Okay. Thank you.
Thank you.
And our next question today comes from Jeff Farmer with Gordon Haskett. Please go ahead.
Great. Thanks, just a big picture follow up to a handful of earlier question. So I'm really just looking back at your traffic growth drivers over the better part of the last year a lot of things in play, but if you think about the move to always advertising.
The chicken sandwich launch delivery growth.
What can you share with us in terms of what has proven to be the most impactful driver over the last year end and in terms of thinking about drivers moving forward, which do you continue to see being a driver as we get into back half of 'twenty three into 'twenty four.
Hey, Jeff.
Morning, and thank you for the question I think we got a similar question last quarter and you know, it's when you think about the elevated advertising.
Dollars that we have going into.
Our media spend.
And you think about us.
Leveraging chicken sandwiches as part of the messaging or.
Using some of those.
Those dollars to to drive to drive just general awareness. It gets kind of challenging to tease apart I think the thing that we talked about last quarter that continued this quarter as this overall strength that we're seeing in our brand is.
Is really the the results of all of these things kind of working in concert with one another and I think we mentioned it last quarter.
But we obviously over deliver even beyond what we expected.
We're continuing to just the overall strength.
Okay, and then just one quick follow up as it relates to the 10% to 12% full year same store sales guidance again.
Again, I might've missed it but what level of menu pricing is contemplated in that guidance.
We we basically are reverting back to our historical approach in pricing and that is one to two points of price through to Windows, We did execute a window in the first half of the year and we will execute another pricing window in the back half of the year.
Thank you and our next question today comes from Brian <unk> with Morgan Stanley . Please go ahead.
Yeah.
Thank you. This this was sort of asked but I think maybe just to ask a different way have you have you seen evidence that.
Some of the customers that have come for the chicken sandwich or maybe some of the customers that are coming through Uber are those are they increasing their frequency over time are they in fact higher frequency than some of your existing customers or perhaps the reverse how have you I think the point is you've done a very good job kind of driving trial.
Have you seen evidence that those are becoming very loyal customers.
Hey, Brian Good morning, and I. Appreciate the question I think the short answer is yes, we have seen.
These guests come in as I mentioned before we're seeing them move up the frequency curve.
After that initial trial, our initial visit and for the quarter, we actually did see.
A nice uptick in and and frequency and I think we mentioned it in our prepared remarks. It beyond just frequency. If you look at all brand level metrics, we saw really strong improvement record levels for the brand kind of across the board and I mentioned in my prepared remarks, when you think about this overall.
Crow backdrop to be sitting here driving transaction growth like we are and have value scores, improving really really gives us a lot of confidence in our ability to to navigate the back half and if there is a significant shift in consumer sense of it we have a proven playbook, we know that we can lean into value retained those indulgent occasions and so.
We feel really good about where we stand today.
Okay. Thanks.
Could you also just maybe provide more detail on international you kind of mentioned the acceleration in same store sales.
We don't see some of those metrics reported regularly but is it consistent with the U S. Any markets that are kind of doing better there what's the additional opportunity to drive sales internationally.
Yeah, Brian where we're really excited about the momentum we see in our international business and the demand that's in our pipeline I'll give you. One example, and I think this is we've talked about it before this is this is the playbook that we're leveraging and new markets and that is the progress.
Yes, we've made in the U K and last week, our U K business set another record week of sales and in fact, our original restaurant in the UK in London in Cambridge Circus.
That opened five years ago, roughly last week had a record week and sold over $100000.
Sales for the week and so I think that just speaks to some of the momentum that I referenced and and we're seeing that same playbook be deployed in in Canada. We're seeing it deployed in Korea and were seeing those ABB has continued to grow while we expand our footprint there.
And then obviously, we talked about the two new markets that we.
We signed in the quarter and the pipeline for new territories really strong. So we're pretty excited about how our international business is performing how the team is executing the strategy and then ultimately how it will become more of the growth story as we as we look a little further out.
Thank you.
So it comes from Brian Martin with Piper Sandler. Please go ahead.
Hey, Thanks, just a question of delivery sales channel follow up on some of the comments from the prepared remarks.
Now that you're firmly established on both of the large platforms.
What do you think is the primary driver of the growth in the coming years from from the 30% sales mix of 50% sales mix is it is it do you just believe more and more consumers will migrate to aggregators over time, and you will benefit because of your offering or are you actually potentially working on some strategies or some marketing to help influence that growth forward on your side as well.
<unk>.
Hi, Brian This is Alex I can jump in here.
We've talked about a bit that we essentially turned on Uber eats last year with the launch and so we haven't invested in the platform that is an opportunity for us to deploy our advertising dollars to build more awareness.
Even though we've seen our our mix a double since the launch week as we've lapped that.
That's a big opportunity for us to build awareness in those two platforms, both door dash and Uber eats marketplaces continue to grow as we expand our awareness, we build frequency as Michael referenced and so it is an opportunity for us to invest in those platforms that can lead us on that path towards those benchmarks of 50.
Per cent plus.
Okay. Thank you.
Thank you and our next question today comes from Chris Carroll with RBC capital markets. Please go ahead.
Good morning, and thanks for taking the question.
I guess just following up on the chicken sandwich and the potential long term benefits youre seeing from it.
How if at all does the momentum you're seeing.
With the sandwich influence, how you're thinking about restaurant formats or real estate strategy longer term.
Yeah No I appreciate the question and good morning, I think for chicken Sandwich, one of the things if you reflect back on.
Wingstop and are 30 years or our degree of menu innovation has really been limited to flavor and so we you know go.
Go back a couple of decades, we added boneless wings.
And then shortly thereafter added tenders and then last year, we added chicken sandwich and I think one of the things that was key in all of those is to not.
To not compromise the simplicity of our operations and we put a lot of work in and in partnership with our brand partners to ensure that when we launched chicken sandwich at.
It didn't impact the simplicity and efficiency of our box and so.
I think that supports the fact that I don't really think it's going to change the overall format of the box the lay out.
We continue just as we sit here today.
At 90, 495% of ourselves our off premise and so we'll continue to execute that because with that efficient footprint heavy off premise in the <unk> that we have grown the unit economics are really strong.
As we sit here today, we continue to see a big opportunity with chicken sandwich that we've talked about and I think longer term, we can see that continuing to influence frequency.
In addition to just bringing in new guests to the brand as well so it's something we're pretty excited about.
Yeah.
Okay great.
And then I know you touched on this in your prepared remarks, but could.
Could you expand maybe a bit more on brand awareness and if you could maybe provide any quantitative measures around us relative to peers.
And then obviously new store growth in system sales growth is going to help fuel advertising, but is there anything else you would highlight.
As part of your strategy to drive awareness higher thanks.
Yeah, we've made considerable progress on awareness, but it still remains a significant gap to where our numbers are relative to what we measure as those top 10 U S. Saar brands and so that's that's what our advertising dollars. We just surpassed $100 million for the first time last year the system sales growth gives us opportunities.
To add more weeks on air haven't always on message through the year and increase the density of our advertising during the weeks Ron and so you know really when you compare our advertising funds to those larger more mature brands. We have a lot of large runway ahead to make wingstop more mainstream.
Thank you and our next question today comes from Gregory Frankfurt with Guggenheim. Please go ahead.
Hey, guys. Thanks, I just wanted to maybe follow up on two questions ago. He makes all how youre thinking about deploying advertising dollars into either door dasher, Uber eats or your native platforms, how you're balancing those priorities right.
Yeah, No I think it's a good question and it's one of those things, we've we see as a big opportunity for US if you reflect back on our overall.
Progress in delivery at roughly 30% sales mix today.
We that's really hasnt been based with us.
Deploying a significant amount of our AD dollars on their platforms a lot of the advertising you see the promotions you see are funded by by those partners because we deliver a really nice high average check and that's good for their drivers and good for their business and so we've seen them a willingness to invest in wingstop, which we appreciate them.
Obviously, when we think about that opportunity to over double almost double our delivery channel mix, we obviously know that as we drive awareness.
Of our brand on those platforms will capture more occasions. So we see that as one of those multiyear sales drivers that we talked about earlier that allow us to sit here today and in and raise raise our outlook for the year and then obviously you know.
Continue to see expanded growth with just strengthening the unit economics.
Thank you and our next question today comes from Michael Tamas with Oppenheimer and company. Please go ahead.
Hi, Thanks. Good morning, you know you were way ahead of the industry in terms of taking less menu pricing and even leading into value more which you know I think it was a big advantage in.
Likely widen your relative pricing you have to competitor. So now it seems like value is becoming a little more widespread across the industry in menu pricing also coming down to do any of these changing dynamics caused you to think about your sales strategy is differently as it relates to the value of promotions.
Hey, good morning.
You know I.
I think we're we're definitely in a unique position, whereas if you look at.
Q2, as an example, I think the <unk> industry on average.
Had about 10 points of price.
On the menu in and we were sitting in a very unique position and I think that speaks to that.
The comments, we made about improvements in our value scores and so what we are hearing from consumers in our research.
Is you know they value or they are being a little bit more discerning with their dollars and what they're looking for is quality and indulgence. Then I think that plays perfectly within Wingstop and how our brand is positioned and so we will have a balanced message for those that are value sensitive.
But then obviously, we still have the opportunity to capture so many new occasions. So as consumers are looking for quality and indulgence I think wingstop is well positioned and just further supports the strategy that we're executing against.
Thanks, and then on the.
You mentioned, a few times about your new supply chain strategy and buying more of the birds not being so relying on the spot market.
And you mentioned visibility in a 24.
How long is that sort of agreement in place for us at just under 24 do you think that there's an opportunity for that to be sort of a much longer term.
Maybe a couple of years thanks.
Yeah, I mean, I think we have made meaningful progress with with our supply chain strategy and and remain confident in continuing to execute against that and as we as I mentioned earlier, we exited Q2 at a record level of boneless mix, 43% and.
As we win more chicken sandwich occasions, as we see that Halo effect on the rest of our business, we see the opportunity to continue to drive that mix, but obviously with that underlying transaction growth.
Where we.
We're using more breast meat in an absolute.
Pounds perspective, and so as we continue to use more breast meat.
Our supplier partners really like that and it's allowing us to have fundamentally different conversations.
With them around how we structure our pricing arrangements for wings.
And as we as we sit here today, obviously, they earn a berry.
It's just north of a dollar a pound, but it's even as we sit here today, it's well over well under the five year average to the tune of roughly 50 50 55 cents from the five year average and so you know obviously, we viewed this as a time to look longer term and talk differently and structurally arrangements differently with our supplier partners.
To ensure more predictability and as we mentioned before ultimately mitigate the volatility that we see in food costs. So we're pretty encouraged about the progress we've made.
Yeah.
Thank you ladies and gentlemen. This concludes today's question answer session and today's conference call.
Thank you all for attending today's presentation.
Now disconnect your lines and have a wonderful day.