Q4 2024 Wingstop Inc Earnings Call
Speaker Change: Please note that this conference is being recorded today, Wednesday, February 19, 2025.
Speaker Change: Senior Vice President and Chief Financial Officer and Kristen Thomas, Senior Manager of Investor Relations
Kristen Thomas: I would now like to turn the conference over to Kristen. Please go ahead.
Kristen Thomas: 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 what we currently expect.
Kristen Thomas: We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance.
Kristen Thomas: Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAP.
Kristen Thomas: Reconciliations to Comparable Gap 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.
Michael: Thank you, Kristen, and good morning. We appreciate everyone joining our call. Before discussing our results, I want to take a moment to acknowledge those affected by the devastation from the wildfires in Southern California.
Michael: California has always been a special place for Wingstop where we have several hundred Wingstop restaurants and millions of fans.
Our thoughts and prayers go out to those impacted.
Michael: Tragic events like this can have a profound impact on entire communities.
Michael: To help support those in need and in partnership with the American Red Cross, during the month of February, we will match contributions made through our Roundup program, dollar for dollar, up to $500,000.
Michael: We also extend our deepest gratitude to the first responders who have worked heroically and tirelessly to protect our communities.
Michael: Now, on to our results. 2024 was another record year, surpassing our industry-leading year in 2023 that showcases the category of one in which we operate.
Michael: We achieved record top and bottom line results, extending our unprecedented streak of 21 consecutive years of same-store sales growth.
For fiscal 2024, domestic same-source sales grew by 19.9 percent.
primarily driven by transactions.
and that translates to a two-year stacked comp of 38%.
Michael: We opened a record 349 net new restaurants delivering a 15.8% unit growth.
And we grew system-wide sales by 36.8% to $4.8 billion.
Adjusted EBITDA increased 44.8% to $212 million.
Michael: Our fourth quarter results were strong. We opened 105 net new restaurants in the quarter and delivered 10.1% same-store sales growth, a comp that continues to be driven primarily by transaction growth.
Michael: Digital sales mix increased to 70%. Adjusted EBITDA increased 44% to $56.3 million.
Michael: These results are a demonstration of the success and staying power of our strategies which continue to fuel demand for growth in all facets of our business.
Speaker Change: In 2024, we saw double-digit transaction growth and an increase in frequency with our digital guests, which is the first time this has happened in my 10 years here at Wingstop.
Speaker Change: I believe the underlying health of the Wingstop business is as strong as it's ever been, yet we feel like we are just getting started.
Speaker Change: I want to acknowledge and thank our passionate team members in the restaurant and our global support center, our brand partners, and our supplier partners. Without them, these results would not be possible.
Speaker Change: Within the industry-leading results in 2024, we surpassed our previous target of two million dollar average unit volumes, a target set just over two years ago.
Speaker Change: As we have scaled, we took an opportunity in 2024 to re-evaluate the global opportunity for Wingstop.
Speaker Change: Based on this effort, we established new long-term targets for both AUVs and global units. We believe we can grow AUVs to $3 million and scale our global unit count to over 10,000 restaurants.
Speaker Change: As I reflect back over the last couple of years, Wings Top has transformed into a brand with scale, creating greater capacity to invest behind our strategies.
Speaker Change: While the consumer is facing tough choices when it comes to restaurant occasions, they also are recognizing the quality and value proposition Wingstop delivers. And yet, we still believe we're the largest brand no one has heard of.
Speaker Change: With system-wide sales of over $4.8 billion, we now have an ad fund budget that has greater scale, enabling us to show up in a meaningful way to bring awareness
to that indulgent Wingstop occasion.
Speaker Change: We are building brand awareness at a steady pace, increasing by a low single-digit percentage in the past couple years.
Speaker Change: but our gap remains at over 20% to more mature brands.
Speaker Change: Our opportunity is significant to bring Wingstop into more households and attract new, lifelong fans into the brand.
Speaker Change: Consistent with previous years, in 2025 we are laser focused on executing our multi-year sales strategies to move us closer to our $3 million AUV target.
Our strategies consist of scaling brand awareness, driving menu innovation,
Speaker Change: expanding our delivery channels, leveraging data-driven marketing, and continuing our digital transformation.
Speaker Change: It's clear to see the impact our strategies are having on our business. From a brand health standpoint, we are seeing improvements in quality, value, consideration, and purchase intent scores, finishing 2024 at record levels.
Speaker Change: Over the past two years, our brand partners and restaurant team members have been focused on operating with excellence, and our internal scores, along with our transaction growth, showcase the impact we are having.
Speaker Change: There remains a significant runway ahead of Wingstop and we believe we are entering this next phase of growth.
Speaker Change: We spent a fair amount of time extracting insights from our digital guests, learning from our customers as well as those that are more broadly frequent restaurants.
Speaker Change: What we're learning gives us confidence in the strategies we're executing and we continue to have significant opportunities to gain our fair share in the restaurant industry.
Speaker Change: We will continue to lean into our always-on marketing strategy and are excited to see the effectiveness of our media placements.
Speaker Change: We look forward to further advancing our relationship as the official chicken and chicken wing partner of the NBA. A great example is the multiple activations we executed at the NBA All-Star Game this past weekend, supported by marquee players in the league.
Speaker Change: You will also see us expand our presence in both familiar and new spaces.
including the NFL, WWE, and the UFC.
Speaker Change: This sizable opportunity and brand awareness combined with the strategies we are executing give us confidence in our ability to grow transactions on top of two record years of sales growth as we have demonstrated in our 21 consecutive years of same-store sales growth
Speaker Change: Technology has always been at the forefront for us at Wingstop and 2024 was a transformational year for our digital business.
We launched our proprietary tech stack, MyWingstop, in 2024.
which we believe will further advance our best-in-class digital platform.
Our digital database has surpassed 50 million customers.
Speaker Change: Nearly 30% growth versus the prior year, which is truly remarkable.
Speaker Change: The most pronounced impacts we have seen early into our launch center around new guest acquisition with a record pace of registrations, increased frequency, and improved ROIs on our hyperpersonalization strategies.
Speaker Change: Guests are beginning to experience a new level of hyper-personalization enabled by the data gathered from our platform, providing them with relevant, personalized, and optimized content.
Speaker Change: Over the past two quarters, we have seen an increase in the number of guests opting in for notifications and registering with our platform.
Speaker Change: This information will help us to fine-tune our robust profiles to engage with our guests in a way that personally resonates with them, creating a more meaningful and engaging experience, which we feel is a competitive advantage for Wingstop.
Speaker Change: We also have been innovating around technology that can optimize the back of the house in the restaurant.
Speaker Change: A little over two years ago, we started working on a solution that we believe will unlock unmet demand.
Speaker Change: The variability and demand can be a challenge for restaurants to operate using our manual processes today and potentially impact or create an inconsistent guest experience.
Speaker Change: it could lead to longer quote times that can risk curbing demand. And as we consider future day part opportunities, in an example like lunch, shortening quote times could be another opportunity to capitalize on and expand the consideration set for consumers.
Speaker Change: While our brand experienced a step-function growth in AUVs, benefiting from almost 40% same-store sales growth that was primarily driven by transactions over the past two years,
Speaker Change: We have been focused on positioning the brand for the next phase of growth and invested in a technology solution that will allow us to fundamentally change our back-of-house operations.
Speaker Change: a solution that further improves overall quality our brand is built to deliver. That cook to order hand-sauced and tossed chicken in one of our 12 bold distinctive flavors.
Speaker Change: We have developed a proprietary AI-enabled kitchen operating platform that will allow us to have a meaningful reduction in our quote times and deliver on guests' expectations around speed of service on a consistent basis.
Speaker Change: In doing this, we believe we will unlock pent-up demand and become more of the consideration set while also improving team member productivity in the restaurant.
Speaker Change: Ultimately, we discovered an opportunity to monetize how we operate our kitchens.
Speaker Change: We believe this new kitchen technology system will be another powerful unlock for our brand and enable an increase in frequency over time.
Speaker Change: This is about capturing our fair share and ensuring Wingstop continues to be a part of the consideration set for guests.
Speaker Change: This new platform supports our existing strategies we are executing, and it just further strengthens our confidence in scaling AUVs to our new target of $3 million.
Speaker Change: We unveiled this solution at our brand partner convention last quarter and they too see the unlock this investment can be for their restaurants.
Speaker Change: Our new kitchen platform, which is a modest upfront investment, still allows us to maintain our industry-leading returns of 70% plus our brand partners have grown accustomed to.
Speaker Change: We are excited to begin the system-wide rollout, a true game-changer for Wingstop.
Speaker Change: and we'll provide more updates in the coming year on this initiative.
Speaker Change: Essential to a successful franchise system is the unit economics, and we believe we have the best in the industry.
Speaker Change: With our supply chain strategy, 2024 created a level of predictability into food costs we haven't seen in the past.
Speaker Change: Coupling food cost predictability with our average unit volumes of more than 2.1 million dollars, our brand partners are seeing cash flows at record levels.
Speaker Change: Our brand partner's demand for growth is demonstrated in the record 349 net new restaurants opened in 2024, as well as what we anticipate for 2025, which is a unit growth rate of 14 to 15 percent.
Speaker Change: We continue to see roughly 95% of our development come from existing brand partners reinvesting back into Wingstop.
Speaker Change: This demand for growth is translating into a record development pipeline with nearly 2,000 restaurant commitments under development agreements at the end of 2024, the strongest pipeline ever for Wingstop.
Speaker Change: The demand we're seeing for more wing stops transcends into our international business. We ended the year with 359 international locations and successfully added our 11th market in the fourth quarter.
Speaker Change: The success in our international expansion strategy was showcased by the level of interest in our UK business, roughly 60 restaurants that was acquired last month for over $500 million, and showcases the value creation Wingstop can provide.
Speaker Change: Although Wingstop is so early in its international expansion, it is encouraging to see our brand resonate so well with consumers across the globe.
Speaker Change: Consistent with what we see globally, our brand attracts a Gen Z millennial consumer that sparks to that quality and value we can deliver.
Speaker Change: We are excited to see 2025 be another accelerator in our journey to scale Wingstop to a top 10 global restaurant brand.
Speaker Change: Lastly, I'd like to close by sharing exciting news of a fundraising program for our new partnership with St. Jude's Children's Research Hospital.
Speaker Change: During the fourth quarter, we created an opportunity for those who share in our success to give back.
Speaker Change: and we did so in a big way. Our team along with our brand partners raised over two million dollars that will directly support St. Jude's efforts to advance research and treatment for childhood cancer and other life threatening diseases.
Speaker Change: The impact St. Jude has on families is incredible and we are grateful for the opportunities to support this life-saving mission.
Speaker Change: I'm also happy to share that our charities organization in 2024 delivered over $3.7 million in community grants and sponsorships to local and national organizations.
Speaker Change: We believe, along with our brand partners, that it is our obligation to give back and we'll continue to look for these opportunities to partner with world-class organizations such as St. Jude.
Speaker Change: 2024 was an exceptional year for Wingstop, a step change year, and one we believe positions us well for this next phase of growth. The underlying momentum and health of our business is strong.
Speaker Change: As we move into 2025, we are focused on the disciplined execution of our strategies, which we believe will bring us closer to realizing our vision of becoming a top 10 global restaurant brand.
Alex: With that, I'd like to turn the call over to Alex.
Alex: Thank you, and good morning. As you heard from Michael, we delivered another year of industry-leading results. In the fourth quarter, system-wide sales increased 27.6 percent versus the prior year to 1.2 billion dollars.
Alex: Royalty revenues, franchise fees, and other revenue increased $18 million, driven by 348 net new franchise openings since the prior year comparable period, a record pace of openings for Wingsop, and showcasing the demand among our brand partners.
Alex: In addition, same-store sales grew by 10.1%, which was primarily driven by transactions.
Alex: On a two-year basis in the fourth quarter, our stacked same-source sales growth was 31.3%, a comp driven by transaction growth.
Alex: Company-owned restaurant sales increased by 3.8 million dollars in Q4 due to company-owned restaurant sales opened and acquired as well as a 3.8 percent increase in same-store sales primarily driven by transaction growth.
Alex: In the fourth quarter, we completed the sale of seven company-owned restaurants in the New York City market to an existing brand partner. In conjunction with the transaction, our brand partner signed a development agreement for 20 restaurants in the surrounding Manhattan market.
Alex: For modeling purposes, following the disposition of our New York restaurants, acquisitions in 2024, and new restaurant openings in 2024, we anticipate company and restaurant sales to be in the range of $124 to $126 million.
Alex: For the first time in our brand's history, at the end of 2023, we were able to communicate expectations for food and packaging costs and had visibility into a mid-30% target range for the year.
Alex: Our brand partners immediately saw the benefits starting in Q1, when bone-in chicken costs started to rise and continued throughout the year at elevated levels.
Alex: In fact, grant partners ended the year with food costs just below the mid-30% target.
Alex: where historically food costs would likely have been five to six hundred basis points higher given the pricing movement on the spot market for classic wings.
Alex: Additionally, we anticipate our cost of sales for company-owned restaurants to be between 75 and 76 percent.
Alex: SG&A increased by $3.2 million versus the prior year comparable period to a total of $31.2 million in the quarter. Primarily driven by investments and headcount related expenses to support the growth of our business.
Alex: SG&A as a percentage of systemwide sales was 2.5% in 2024, which continues to show leverage as we scale toward our vision of becoming a top 10 global restaurant brand.
Alex: Our long-term expectations for SG&A as a percentage of system-wide sales is in the 2-2.5% range.
Alex: And based on our outlook on SG&A for 2025, we anticipate operating in a similar percentage to 2024, while making investments that support our long-term growth aspirations.
Alex: Since 2022, we have doubled our adjusted EBITDA, and our full year 2024 EBITDA was $212 million, highlighting the strength of our highly franchised asset light model.
Alex: In December, we completed a securitized financing transaction which included the issuance of a new series of $500 million dollar securitized notes.
Alex: Proceeds from the transaction were used to pay related transaction fees and expenses, strengthen the company's liquidity position, and for general corporate purposes, including the repurchase of shares of the company's common stock.
Alex: As a result of this transaction, the additional interest expense associated with the securitization we complete in December reduced Q4 EPS by approximately $0.05 per share.
Maximizing shareholder returns remains a key tenet of our strategies.
Alex: This June will mark our 10th anniversary since becoming a public company.
Alex: During that time we have returned nearly 1 billion dollars of capital to shareholders and delivered a total shareholder return of nearly 2,000 percent.
Alex: And following the close of our securitization transaction in the fourth quarter, our Board of Directors authorized an additional $500 million for our share repurchase program.
Alex: To further demonstrate our commitment to the program, the company entered into an accelerated share repurchase agreement to repurchase $250 million of our common stock that is anticipated to conclude by the end of the first quarter.
Alex: Upon execution of the ASR agreement, Wingstop received and retired 551,325 shares of our common stock, representing an estimated 75% of the total shares expected to be delivered under the ASR agreement.
Alex: As of December 28, 2024, $311.1 million remained available under the Share Repurchase Program.
Alex: In addition to our share repurchase program, we remain committed to returning capital to shareholders through our regular quarterly dividends.
Alex: This dividend will be paid on March 28, 2025 to stockholders of record as of March 7, 2025.
Now, on to our 2025 Outlook.
Alex: As you heard from Michael, we are confident in our strategies that have us on our path to our 22nd consecutive year of same-source sales growth, and are providing guidance of a low-to-mid single-digit same-source sales growth for the year.
Alex: Our outlook for global unit growth rate is 14 to 15 percent, which we believe is industry leading, an example of how we are continuing to scale our footprint globally.
SG&A guidance is estimated to be approximately $140 million.
Alex: which includes non-recurring system implementation costs of $4.5 million that will be an add-back to adjusted EBITDA and approximately $26 million of stock-based compensation expense.
Alex: Lastly, for modeling purposes, at the start of the first quarter of 2025, the advertising fund contribution rate will increase from 5.3% to 5.5%.
Alex: As a reminder, this is a net neutral impact to the P&L, as this investment will be funding additional operating expenses associated with our MyWingStop platform.
Alex: 2024 was an incredible year for Wingstop and our results would not have been possible without the continued dedication of our global support team members, restaurant team members, brand partners, and supplier partners. I want to thank them for their continued commitment.
Alex: While we are proud of the progress we have made against our strategies over the past year, we enter 2025 with greater visibility into our path to achieving targets of $3 million AUVs and 10,000-plus global units.
Alex: I'd like to now turn to Q&A. Operator, please open the line for questions.
We will now begin the question and answer session.
Alex: To ask a question, you may press star then 1 on your telephone keypad.
Alex: If you are using a speakerphone, please pick up your handset before pressing the keys.
Alex: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Please limit yourself to one question and a follow-up.
Speaker Change: Our first question today comes from David Tarantino with Baird. Please go ahead.
Speaker Change: Hi, good morning. My question is on the comps outlook, low to mid single digits for 2025. I was just wondering maybe if you could comment on what the right framework to use is.
Speaker Change: You know, maybe an unusual year given what you're cycling and I do have a follow-up
Speaker Change: Hey, David. Good morning. This is Michael. Thank you for the question. You know, I think as it relates to the outlook for 2025, and maybe more broadly as we look at our 3- to 5-year target that we've had previously of mid-single digits,
Speaker Change: That's intended obviously to guide expectations and kind of what to model on a long-term basis.
Great, and the follow-up is...
Speaker Change: You know, how you're thinking about this year playing out, you know, on a, you know, whether you want to talk about first half or second half, just, you know, kind of
Speaker Change: Thanks, David. We definitely expect a few questions this morning as it relates to comp, so maybe I'll just I'll just hit that head-on in a more broader response, but
Speaker Change: I think if you take a look at the restaurant industry over the past two years across the entire industry, it's actually experienced declining traffic. And if you look at Wingstop, we've actually gained share in the restaurant industry in a meaningful way.
Speaker Change: And that's against an industry backdrop that was not growing transactions where Wingsup in 2024 delivered a 19.9% comp, and that was on top of a comp.
being driven primarily by transactions and
Speaker Change: And what I would really attribute that to are really two things. One is just the effectiveness of our proven strategies that we're executing against that we believe provide multi-year impacts.
Speaker Change: But then we also acknowledge the fact that the industry backdrop that we were operating in, a lot of brands took too much price, and the consumer group frustrated with that. And that put us in a position to...
Speaker Change: to win an outsize share in the marketplace and something we took advantage of and we're excited about and view that as almost a step change in this new base level of revenue that we're able to build off of and grow from there.
Speaker Change: But as we look at the business today, or even into Q4, that backdrop has definitely evolved.
Speaker Change: QSR is promoting value heavily as a way to reverse their transaction trends.
Speaker Change: But we remain confident that the consumer is going to continue to be selective and prioritize quality and value, which are both tenets of the Wingstop brand. But we also want everybody to really understand that we are managing the business for the long term.
Speaker Change: and we've made strategic investments along the way that we believe position the brand in a spot to be able to sustain long-term growth as we scale AUVs from 2.1 million dollars today to our target of 3 million dollars
Speaker Change: and we've made investments along the way, whether it's My Wingstop or
Speaker Change: I think really showcase that we are setting this business up for the long-term and we're running it in a way that actually gives us confidence in being able to continue to deliver on growth year-in and year-out.
Speaker Change: and I really think it hits on and I think an important point is just the underlying strength of our business.
Speaker Change: While we might not be delivering the comps that are north of 20% again, the overall fundamentals of our business are really strong. If you look at our digital business, it's north of 70% today.
Speaker Change: And that's allowed us to grow a digital database from what just about a year ago was about 40 million users and now it's north of 50 million users.
Speaker Change: and that's giving us information and data that we're able to drive our business.
Speaker Change: And then you look at the AUV itself, at $2.1 million on average, the progress we've made against our supply chain strategy, the cash flows for our brand partners are as strong as they've ever been, and you're seeing that show up in development.
Speaker Change: with a 349 net new unit number for 2024. It's something we're really excited about. And one thing that I think is really important to understand the strength of our model, if you look at the restaurants that opened in 2024 and you annualize.
Speaker Change: their sales, we generated north of a half a billion dollars in system sales. And as you can see, based on our outlook for 2025, we expect to do that again. And so the strength of our model is really healthy and really strong, and we see a lot of runway and potential in our strategies that we're executing again.
Speaker Change: And David, good morning. This is Alex. I can jump in a bit on the pace of the comp. You know, something we did contemplate in our guidance of low to mid-digit same-source sales is really a function, to your point, on
David Tarantino: primarily driven by transaction growth. So I do, we do believe that the pacing will kind of more follow and be a function of the lab.
David Tarantino: Q1 specifically, I will call out, and I think you've heard this from other peers of ours out there, is we did see a little bit of noise related to the unseasonal weather in the southeast and the fires in California, but that's the only one-off example in the first quarter, but outside of that, it's more about what we'll be lapping.
Great, thank you.
Speaker Change: The next question is from Andrew Charles with TD Cowan. Please go ahead.
Speaker Change: Yeah, unfortunately, Andrew, I wouldn't say it's as linear as what we had play out last year just given the level of transaction growth and some of what we were lapping. So to think about it more, back to my comments on the pacing of the comp and how we thought about or what we contemplated in the low to mid-single-digit same-source sale guide.
Speaker Change: Okay, and then I wanted to follow up just on the CRM efforts. You know, you talked about how these are starting with email database of 50 million users.
Speaker Change: Hey Andrew, yeah, we're excited. I mean, we're six months in roughly with MyWingSop and our ability to really connect
Speaker Change: That database that we've built that we mentioned is over 50 million users strong
Speaker Change: and really use that to lean in and connect that with the consumer digital experience and lean into hyper-personalization.
Speaker Change: Some of the early indicators that we've seen with this multi-year strategy we have with MyWingStop is
Speaker Change: our highest digital guest growth of nearly 50% year-over-year. We saw an increase in frequency. We actually are seeing an average check increase. And we're really excited to see the fact that we're actually seeing an increase in digital guest satisfaction of about 6% year-over-year.
And then we saw over 20% of
Speaker Change: We saw over 20% growth in the number of guests among our heavy users.
Speaker Change: And what we'd really like to see is we're seeing both
Speaker Change: new move up the frequency curve and as well as growth within our heavy. And so both ends of the frequencies curve, we're seeing really nice growth by leveraging MyWing stuff and this hyper-personalization. And so as we think about the business and continuing to drive growth, we view this as something that we're really excited about to continue to drive the business over the longterm.
Thank you very much.
Speaker Change: The next question is from Jeffrey Bernstein with Barclays. Please go ahead.
Jeffrey Bernstein: Great, thank you very much. My first question, Michael, just following up on you mentioned two SRPers and value. I'm just wondering how do you measure your own value scores?
Speaker Change: How do you think you best communicate that value, especially in an environment where
Speaker Change: All of QSR is pretty much talking about a $5 meal, a value menu. Do you think consumers know you have, for example, a sandwich meal for one or a family bundle, both very attractive on a per person basis? Just trying to get a sense for how you think about value and where you score and how best to communicate that. And then I had one follow-up.
Speaker Change: Hey Jeff, good morning. Yeah, I think it's really important to note that value is more than just price point It's more about value for money And when you compare that or pair that with quality and that indulgent wingstop occasion we've actually measured improvements in those scores and I think we mentioned it in our prepared remarks and
Speaker Change: And so we're not necessarily competing against that $5 value mill, but we know that when the guest is prioritizing value and quality, Wings Up is well positioned to win our fair share, which I think we showcased in 2024.
Speaker Change: understood and then just the follow-up is on the the unit growth for 2025 you're talking about 14 to 15 percent growth
Speaker Change: It's actually more similar to the 15% plus you just did in 24. So just wondering, is mid-team growth a more reasonable assumption for the next?
Speaker Change: Two years seemingly you have a much stronger pipeline that you mentioned I think it's a 2,000 or so units and that's what I think about US versus international openings Within that target for 2025. Thank you
Speaker Change: Yeah, Jeff, we're really excited and encouraged by the strength of our development pipeline.
Speaker Change: and obviously that's what gives us confidence to be able to guide to such a strong number for 2025, something we're excited about. We're not hit a point really necessarily where we're gonna guide beyond 2025, but what I will tell you is,
Our pipeline is the strongest it's ever been.
Speaker Change: And if you just go back two years ago, that pipeline was roughly about a thousand restaurant commitments.
Speaker Change: As we mentioned on the call, it's close to 2,000 restaurant commitments as we enter 2025.
Speaker Change: and that reflects opening around 600 restaurants in that two-year period. And so you can see, and it's really showing up in the pipeline, the level of excitement our brand partners have with opening more wing stops, and it just is a testament to the strength of the unit economics.
Great, thank you.
Speaker Change: The next question is from Jim Salera with Stevens Inc. Please go ahead.
Thank you for answering our questions.
Speaker Change: If we think about new customer acquisition, which has been a big source of growth for you guys,
Speaker Change: Did the value focus messaging and, you know, advertisement in QSR impact your new customer acquisition and maybe just some thoughts on kind of your marketing messaging in 25 and how you continue to attract new customers when the industry as a whole is very kind of, you know, price focused at the moment?
Speaker Change: Hey, good morning and thanks for the question. Now, I think as we mentioned on the call, we saw a record level of new guest acquisition.
Speaker Change: retention rates that we've ever seen and we're encouraged by that. I think it showcases that
Speaker Change: When new guests do come in to Wingstop, whether it's via the chicken sandwich or...
Speaker Change: our core commodity, our core product of the bone-in wing, we're able to retain them and bring them back in. And we've talked about it throughout 2024. These new guests that are coming in, we're seeing them move up the frequency curve a little bit faster.
Speaker Change: And we mentioned it, I think, earlier, but the consumers, they are selective in how they are spending their dining out dollars. And so I think when they are making more choices and being a little bit more selective, Wingstop is well positioned to win our fair share.
Great, and maybe as a quick follow-up.
How can we think about pricing as a factor?
Speaker Change: in the 2025 same-source sales died, and maybe as a part two to that. Have you guys ever given out what your average ticket is, just as a way to kind of, you know, compare across other QSR occasions?
Speaker Change: Yeah, Jim, this is Alex. I can jump in. Our average ticket tends to be in that low-to-mid $20 range, where we tend to be a larger, more of a group occasion, party size of two or more, so not quite comparable with maybe those individual eater occasions you may see more frequently at fast food.
Speaker Change: Regarding pricing, we do anticipate, and we've talked about this in the past, just having a historical
Pricing in two different windows
Speaker Change: particularly in a market like California where they faced a significant amount of inflation.
Speaker Change: but not dissimilar to other years in our approach. We're going to listen to the consumer, monitor the health of the consumer, and inform our pricing strategy based on what we learned there.
Speaker Change: I appreciate all the detail guys, I'll hop back in the queue.
Sarah Senator: The next question is from Sarah Senator with Bank of America. Please go ahead.
Sarah Senator: Hi, thank you. I've got a question, maybe two kind of follow-ups. One is...
when you talked about, like, unit growth.
Sarah Senator: I wanted to get your thoughts on that, aside from obviously tough comparison and everything else that you covered. So just that notion of unit growth versus comp and that balance, especially in the context of what franchisees want to see, and then I'll have another quick question.
Sarah Senator: is north of 2,000 restaurants today, but yet we believe our total opportunity is more than 6,000. So there's a lot of white space in front of us, and so we don't really see development playing a role in the overall cost.
But what we're really excited about is...
Sarah Senator: and the 2024 vintage is actually outperforming that somewhere around, on average, about 1.7 to 1.8 million. And so we're seeing continued productivity in these new restaurants, which is really encouraging to see, and obviously our brand partners are really excited about that as well.
All right. Bye-bye. Bye.
Speaker Change: Alex, just quickly on the share repurchase, I know in the past you've done special dividends as well. I guess, what was the thought in terms of deciding how you want to return cash to shareholders just in the context of a higher interest rate environment?
Speaker Change: The way we have approached this conversation and the support from our board is to think about the long-term opportunity to maximize shareholder returns.
Speaker Change: through our return to capital strategy. And I think last quarter you saw us be opportunistic with a new tranche of debt that was issued, $500 million and sought approval for a new $500 million or additional $500 million share repurchase program.
Speaker Change: And so as we think about the deployment of that capital, and we entered into a $215 million Accelerated Share Repurchase Program, we're thinking about the long-term opportunity and value creation a return of capital strategy can provide for shareholders, and I think you'll see us continue to focus on that or have that mindset along with the board.
Speaker Change: So the idea is just that the value of the stock value is compelling that that was a better use of a special dividend.
That's right.
Thank you.
Speaker Change: The next question is from Brian Harbour with Morgan Stanley. Please go ahead.
Speaker Change: Is the main change there to sort of add some predictive capacity and thereby lower service times? Is there anything else that we should think about there, and how quickly would you expect that to deploy?
Speaker Change: Hey Brian, good morning. Yeah, we are we're really excited about as well as our brand partners are excited about this new kitchen Operating platform and we actually believe this is going to fundamentally change our kitchen operations
Speaker Change: This is something that was co-developed and was built specifically for Wingstop.
Speaker Change: and we see this as a really exciting opportunity to speed up the competency and role for new team members and also provide role clarity. And ultimately, we think it's gonna increase the productivity of our team members.
Speaker Change: But we think this platform is actually something, Brian, that's going to be foundational as we think about opportunities to connect
Brian Harbour: What's happening inside our kitchen with our investments we've made in the consumer facing digital business
of our platform of My Wingstop. And so this is.
Brian Harbour: This is pretty exciting for us, and we're going to be able to not only increase speed, but be more consistent.
Brian Harbour: and we believe it's going to make Wingstop more of the consideration set. It's gonna unlock some unmet demand and we believe over time it's gonna help us continue to increase frequency, which we know will be a big driver as we continue to scale AUVs towards three million.
Okay, got it, thanks.
this year, whether it's sort of...
you know really leaning into
Brian Harbour: personalize marketing harder? You know, is it more about ad placement? Do you expect to perhaps do more advertising on delivery to drive that business? Which of those, or you know, maybe it's the innovation side, right? Which of those do you think could be most impactful this year as you kind of come off of two very good years?
Speaker Change: Hey Brian, I think we've been asked the inverse of that question probably a year ago and what's driving the comp the most and I really think it is the synergistic nature of these strategies we're executing against.
And, as we mentioned in the prepared remarks,
Speaker Change: 2024 marked our 21st consecutive year of same-store sales growth and there's been some years where those sales were really high and then there were other years where the sales growth was lower but across the board there was healthy growth across each one of those 20, 21 years.
Speaker Change: And so I don't think 2025 is going to be any different. And it's these strategies working together that each have a lot of runway associated with them. I think we actually called out in our prepared remarks the amount of runway we just have in brand awareness. We referenced it's over a 20 point gap to other national brands.
Speaker Change: and if you reflect back over the last year, we moved it low to mid single digits. And so that opportunity is huge. And that's just an example of.
Speaker Change: these strategies and the multi-year impact they have. And so I don't think I would call out any one of them specifically, but it's about executing against each one of them with discipline.
Okay, thank you.
Speaker Change: The next question is from Chris O'Call with Stifel. Please go ahead.
Chris O'Call: Good morning, guys, and thanks for taking my question. Alex, I had a quick follow-up on the comp cadence. Do you anticipate any quarter will fall outside of the guided range for the full year? I'm just trying to help maybe level set everyone's expectations.
Alex: Hey Chris, you know we're not going to give quarterly guidance but I think you know we're confident in our ability to deliver our outlook of low to mid single-digit same-store sales.
Okay, fair enough and then
Speaker Change: Yeah, these new audiences, Chris, there is some overlap, but I wouldn't say there's a lot. But what I would tell you is their core audience looks a lot like Wingstop's core guests. And so that's what we really like about some of these new properties we're growing into.
Speaker Change: and and so we think there's a lot of opportunity as we look as we talk about continuing to grow brand awareness of some of these new new areas like UFC that we're excited about.
Okay, great. Thanks, guys.
Speaker Change: The next question is from Danilo Gargiulio with Bernstein. Please go ahead.
Danilo Gargiulio: Thank you. Michael, I actually want to follow up on that comment on awareness and specifically as you're reflecting on Wingstock today, how much more sales upside are you expecting from awareness increasing versus pushing up maybe the frequency given your new MyWingstock platform and the hyper-personalization?
Danilo Gargiulio: And then if you reflect on kind of the marketing ROI that you've been able to generate maybe over the past couple of quarters, are you happy with that? And what are your thoughts on how to accelerate the awareness gap closure?
Speaker Change: Hey Daniel, thank you for the question. You know, we're excited about...
Speaker Change: When we talk about moving frequency, we're talking about decimal points at this point in time But we see that as a big opportunity because we know that wing stop is it's still a relatively low frequency Occasion on average three times a quarter or once a month. And so we know that just winning one more occasion
Speaker Change: in a quarter has a meaningful impact to our AUVs, but we really look at those two things working in concert with one another as we think about how we're going to scale AUVs from 2.1 million today to our target of $3 million.
Speaker Change: Margin Improvement, and how do you plan to communicate the increased speed of service to consumers going forward?
Speaker Change: Yeah, we're really excited about what we saw in our test, and we've been testing this for over a year now, but most recently...
Speaker Change: We've had it in quite a few restaurants, roughly, call it 30 restaurants, and we are seeing a pretty remarkable consistency and increase in speed of service.
Speaker Change: and we are seeing those restaurants in this test outperform control.
Speaker Change: Obviously, it's going to take more with the consumer and a marketing message, I think, to really capture that opportunity that we see in front of us.
Speaker Change: But as we think about that frequency, just as an example that I referenced earlier, if we're able to win one more occasion, it's a meaningful increase in our average unit volume per restaurant.
Speaker Change: And so we think we're going to be able to get this rolled out within, call it the next 12 months.
Speaker Change: and then from there, really start to leverage this as a way to capture that unmet demand and become more the consideration set, which gives us a lot of confidence in these strategies we're executing against. It's not really anything, a new strategy, but it really bolsters these existing strategies that we're executing.
against.
Speaker Change: The next question is from Jeff Farmer with Gordon Haskett. Please go ahead. Thank you. You did touch on it, but can you share your thoughts on the health of the Wingstop customer across some of your income cohorts, especially that lower-income consumer?
Speaker Change: Hey, Jeff. Good morning. Yeah, I think more broadly, I guess, more broadly speaking, the consumer seems, I'll just kind of say, okay, if you look at the data,
whether it's jobs, whether it's wages,
Whether it's credit card balances
Speaker Change: The consumer seems okay, in general. I wouldn't say good, I wouldn't say bad, just okay. And I think that's consistent for the Wingstop consumer. But I will say, in our data and in some of our consumer insights that we conduct, we've definitely seen an elevated increase of just anxiety about the future.
Speaker Change: with a consumer and obviously we know that that can impact their behavior and and how they engage with whether it's you know indulgence taking taking the trip or or splurging on anything but generally speaking we see the consumer okay
Speaker Change: But obviously we'll stay close to this and continue to execute against the strategies we're talking about today.
Speaker Change: Okay, that's helpful. Just one follow-up here. In terms of measuring things like anxiety with your your core customers, how are you doing that? Is that through a third party or how are you measuring some of those metrics?
Speaker Change: Yeah, I mean, we leverage both third-party insights as well as our own consumer research that we do internally, and I think, you know, it was widely reported in January how you saw an elevated increase in just the consumer's anxiety about the future.
Okay, appreciate it. Thank you
Speaker Change: The next question is from Christine Cho with Goldman Sachs. Please go ahead. Thank you for taking my question. I wanted to touch upon the international side of the business. Do you envision any impact from the recent acquisition of Wingstop UK in view of the future Western Europe expansion and also how do you continue to drive momentum in Canada? Thank you.
Speaker Change: And you've also heard us talk about a way to facilitate our strategy on international development by making small investments in these startups as we open a new market. And the UK was an example of this. We took a minority equity position in the business.
and, you know, you saw the transaction, the...
the value of the transaction upwards of $500 million.
Speaker Change: for a low upfront investment for us. We see that as a way to create value creation for our shareholders.
Speaker Change: as well as facilitate that growth with our brand partners in the market. For the UK specifically, you know, at one point I think we thought the opportunity in the UK was somewhere in the 250 restaurant range as we went through this transaction and just seeing the
Speaker Change: and the conversations we're having with the financial sponsor that bought the business and we now see an opportunity that could be upwards of 450 restaurants.
Speaker Change: We extended a development agreement as part of this transaction, including Ireland, and we do see an opportunity where there could be expansion beyond the UK and Ireland into Western Europe as well. And so it's a component of our strategy that we're really excited about, and probably more to come from us as we enter new markets, which we anticipate in 2025 to be.
Speaker Change: two to four additional international markets this year. With regards to Canada, that is another market example that stands out really strong, it's almost moving up the awareness curve faster than we saw in our UK business. They're now looking at extensions in to other provinces in Canada after building those flagship locations
Matt Chee Enterprises, World Bank
Thank you.
Speaker Change: Hey, thanks for the question. Alex, I think the last time you and I spoke, you were talking about basically the strategy to bring in a customer and then try to get a repeat visit. I think it was in the first 90 days.
Speaker Change: Can you maybe help frame up what you're doing from that front? How much maybe you've seen that metric improve and just any other strategies you're working on to change that?
Speaker Change: Yes, good morning, Greg. Great question. You know, that's an example of one of the metrics we've seen flow through from our launch of MyWingSub. What we do is measure, after that first visit of a new guest entering our database, how quickly do they return in that first 90 days. And so we measure that retention rate. We were just looking for one additional visit following that first one. And coming out of 2024, we had a record level, a record high
Speaker Change: for us. And so the investments we're making around enriching the database.
Speaker Change: attaching 500 different data points to learn about that guest and that profile we can build around them, how they then segment into one of our cohort groups that we can deploy hyper personalization strategies against.
Speaker Change: That's a multi-year opportunity and as Michael mentioned something we're very early on and something we see providing benefits in future years
Speaker Change: This concludes our question and answer session and the Wingstop fiscal fourth quarter and full year 2024 earnings conference call. Thank you for attending today's presentation. You may now disconnect.
Thank you.