Q1 2025 Wingstop Inc Earnings Call
Yes.
Speaker Change: Good morning, ladies and gentlemen, and thank you for standing by welcome to the Wingstop fiscal first quarter in 2025 earnings Conference call all participants will be in listen only mode.
Speaker Change: Should you need assistance. Please vote a conference specialist by pressing the star key followed by zero.
Speaker Change: Please note that this conference is being recorded today Wednesday April 30th 2025.
Speaker Change: On the call today are Michael Skipworth, President and Chief Executive Officer, Alex Ko wider senior Vice President and Chief Financial Officer, and Christian Thomas Senior manager of Investor Relations.
Christian Thomas: Now I'd like to turn the conference over to Christian. Please go ahead.
Christian Thomas: And welcome to the fiscal first quarter 2025 earnings conference call for Wingstop.
Christian Thomas: Our results were published earlier this morning and are available on our Investor Relations website at IR Wingstop dotcom.
Christian Thomas: The discussion today includes forward looking statements. These statements are not guarantees of future performance.
Christian Thomas: They are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect.
Christian Thomas: Our SEC filings describe various risks that could affect our future operating results and financial condition.
Christian Thomas: Certain non-GAAP financial measures that we believe can be useful in evaluating our performance.
Christian Thomas: Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Christian Thomas: Filiation to comparable GAAP measures are contained in our earnings release.
Christian Thomas: 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.
Michael: With that I would like to turn the call over to Michael.
Michael: Thank you Kristen and good morning, everyone.
Michael: Start to 2025 has been one that has been underscored by uncertainty.
Michael: Despite increased uncertainty across the consumer landscape, our Q1 results showcase the resiliency of the Wingstop brand and the staying power of our long term strategies.
Michael: I want to start by thanking our team members brand partners and supplier partners for their tremendous efforts that position us to deliver these strong results, while continuing to serve our guests that high quality indulgent flavor they've come to appreciate with Wingstop.
Michael: It is moments like this that demonstrate the excitement and enthusiasm for wingstop potential.
Michael: My comments today will be divided into two parts first discussing the current macro environment and then I want to provide a couple of progress updates on our strategy and the long term opportunity for Wingstop.
I believe is and will continue to be the best story in the restaurant industry.
Michael: As you have seen in the consumer data and have heard from several other companies that have reported 2025 has proven to present a dramatically different macro operating environment than we experienced in the last couple of years consumer sentiment has dropped to its second lowest level since 1952.
Michael: Even surpassing pandemic levels, while I believe it is impossible to know with certainty.
Michael: This current macro environment, they'll similar to consumer pullbacks, we have seen before.
Michael: Indicators, we see in our business show pockets, where the consumer has an elevated level of concern as they face the macro economic uncertainty.
Michael: That being said, we don't believe what we are seeing is broad based but rather concentrated amongst certain geographies, which suggests to us more of a near term issue.
Michael: During our 21 consecutive years of same store sales growth, we have navigated similar periods of temporary consumer pullback in years, such as 2017, 'twenty 2020 'twenty, two we experienced the consumer navigating a more challenging macro and elevated anxiety.
Michael: Levels that created unpredictability with consumer spending in the macro environment like today or even in those prior examples we believe the consumer can show a near term reaction to preserve cash and re prioritize spending.
Michael: That being said, we've navigated these situations effectively in our past and as evidenced by the strength of our model delivering industry, leading returns for our brand partners.
Michael: And our first quarter, we are lapping two consecutive years of over 20% same store sales growth.
Michael: I'm proud to report that we were able to deliver same store growth inclusive of transaction growth on these incredibly difficult lapse.
Michael: Our comp of 0.5% includes impacts from the California fires more severe winter weather events in the southeast and the macro backdrop, we're now operating in.
Michael: However, we have not slowed our pace of development, which is on an accelerated pace this year.
Michael: We opened a record 126 units in the first quarter digital sales increased to 72%.
Michael: Adjusted EBITDA increased 18, 4% to $59 5 million.
Michael: These strong results are a demonstration of the success and staying power of our strategies.
Michael: Despite the headwinds confronting us and many others, we remain focused on executing on our long term strategy and the incredible opportunity that is in front of us scaling <unk> to $3 million and expanding our footprint to over 10000 restaurants globally, we will continue to execute on.
Michael: Our proven strategies, which consist of scaling brand awareness driving menu innovation.
Michael: Banning our delivery channels, leveraging data driven marketing and enhancing our digital transformation. It is clear to us the impact our strategies are having on our business.
Michael: The underlying fundamentals of our business remains strong.
Michael: Our guest scores and survey data showcase that brand love is at an all time high guest are telling us they want to engage with a trusted brand like wingstop and one that can reliably deliver quality and value.
Michael: We're measuring record levels on brand health metrics, while the broader restaurant benchmark show declines.
Michael: Operating kpis at the restaurant level continue to improve in the month of March we had our largest single month of guest acquisition on record.
Michael: We believe the strengthening of our underlying fundamentals position us to emerge from this macro environment and an even stronger position with the consumer.
Michael: I mentioned a record breaking 126, new restaurants, we opened in Q1 something that has exceeded our expectations restaurant development is a key enabler for building brand awareness.
Michael: Coupling that with an AD fund that is growing by double digit percentages. This year, we're continuing to have the fuel to invest in meaningful ways to bring awareness to that indulgent wingstop occasion.
Michael: Our partnership with the NBA is proving to be valuable as we see top tier presence with the in game and on broadcast messaging in fact Wingstop was the most seen brand during the NBA games. This season, enabling our strategy to drive brand awareness.
Michael: Our creative features our new crispy chicken tenders that was re launched this past quarter, and which guests can get sauced and tossed in any one of our 12 bold distinctive flavors.
Michael: Similar to the chicken sandwich tenders represent a meaningful opportunity and an adjacent demand space for us to access our fair share.
Michael: Create excitement around our launch we opened a pop up bar in Brooklyn, the first of its kind.
Michael: That was a bar entirely dedicated to chicken tenders, we called it bar tender. The response was impressive with thousands of RSV piece in the first hours and lines wrapped around two city blocks. Although it is still early initial observations suggest that the new tender guests.
Michael: Exhibit similar characteristics and behaviors to those seen with the launch of our chicken sandwich, where the guests visited for the first time as an individual occasion, rather than a group.
Michael: Expect to hear more from us in 2025 to showcase what we believe is the best tender out there.
Michael: We've grown to more than 2600 restaurants and have eclipsed $2 million <unk> with essentially the same simple menu and model from our first restaurant that opened in 1994 in Garland, Texas not much has changed in our kitchens to get us to this point.
Michael: Still operating with paper kitchen tickets and limited back of House technology integration as.
Michael: As the brand we challenged ourselves to find a way to leverage technology to drive more consistency and further enhance the quality that we deliver within our indulgent wingstop occasion that.
Michael: And that journey started two years ago, we started with surveying tens of thousands of consumers both wingstop guest and non wingstop guests going deep to understand all restaurant occasions and for each of those occasions, clearly defining what's important to those guests.
Michael: We also assess where we best fit in a demand space and how we win more of their consideration set.
Michael: Sign is that there is not a fundamental shift needed in our menu or strategies to deliver $3 million <unk>, but yet we have an opportunity around speed of service and consistency.
Michael: Today, as we size up our core demand space, we are only winning 1% share. However, benchmarking other large more mature Qs stars they are winning 20% of their respective demand space.
Michael: We also clearly understand that can suit what consumers expect within the occasion, we are targeting they expect high quality food value through a group occasion and in adult <unk> experience Wingstop nailed it on all three.
Michael: In our last earnings call, we announced our new kitchen operating platform.
Michael: Which we're referring to internally as the Wingstop smart kitchen.
Michael: We believe our new kitchen operating platform can further enhance the value proposition for both new and existing guests are standard quote time is roughly 20 minutes at its best today as we encounter variability in demand during our busiest hours, we can see quote times reached <unk>.
Michael: 45 minutes or higher and managing guests' expectations through an accurate quote time is a manual process today and we know that this can lead to an inconsistent guest experience, but when we get it right. There is nothing that compares to that first bite experience we can deliver.
Michael: Consider this our <unk> these are $2 $1 million and yet we're only gaining 1% of our fair share. There is a significant amount of unmet demand that wingstop is best positioned to win.
Michael: Our investments in our proprietary technology opportunity to build brand awareness and expanding delivery are key strategies in that journey to capturing more of our fair share.
Michael: One more visit per guests per quarter translates to a significant step towards our $3 million target.
Michael: And this is where wingstop smart kitchen enters into the equation.
Michael: Over the past two years, while same store sales grew 40% stacked we were focused on executing against our long term strategies and investing to make sure we were well positioned for our next phase of growth.
Michael: The Wingstop smart kitchen is the interplay of software and hardware. This is a technology solution. We co developed with the startup that is built for wingstop customized for our menu our guests and our team members.
Michael: Through the deployment of this new kitchen operating platform, we have seen consistent order times that are half of our standard quote time, and we believe unlock new day parts and increase order consistency. The solution set includes three elements and AI driven demand forecasts.
Michael: <unk> technology.
Michael: <unk> highly visual kitchen display system, and our customer facing status tracking order ready screen.
Michael: This platform has a demand forecast that is integrated into the kitchen operating system, providing role clarity and efficiency for team members improving accuracy and in turn helping to deliver a 10 minute average ticket time.
Michael: Not only is this over a 50% reduction in ticket times, it's also delivering a consistent guest experience and improving product quality.
Michael: We have made great progress in our rollout at the end of Q1, we have deployed the Wingstop smart kitchen and over 200 restaurants. We are pleased with the early results, we've seen including improvements in overall satisfaction and cutting quote times in half sales for these <unk>.
Michael: Stronger versus control restaurants are outperforming.
Michael: We are targeting to have the rollout complete by year end.
Michael: This is truly a game changer for our guests. It's a game changer for our team members and it's a transformation in our restaurants that we believe will be a catalyst on our path to $3 million.
Michael: Yes.
Michael: Over the years, we have demonstrated our ability to innovate and maintain discipline around investments that we believe drive the business for the long term.
Michael: In 2023, we've made investments into our database to enrich and build robust guest profiles. This led to our wing I'd platform unlocking first party data capture at scale and laid the foundation personalized experiences across channels and.
Michael: In 2024, my Wingstop, what's the next step to enable this personalization through a seamless and best in class digital ordering experience wing ideas, allowing us to execute hyper personalization strategies designed to create loyalty like behaviors with our guests since we launched my wing.
Michael: Stuff, we've been mining for insights and learning, which strategies are proving to be most effective.
Michael: But we aren't stopping there with our aspirational goal of digitizing every transaction. We are focused on elevating the end to end guest experience and that next natural evolution for us will be a loyalty program.
Michael: With a database that has scaled to over 15 million users as well as our new Wingstop Smart kitchen innovation. We believe the timing is now right for us.
Michael: We have an opportunity to drive frequency and retention by rewarding repeat behavior and tap into that emotional connection our guest have with our brand.
Michael: Supercharged by wing I'd.
Michael: Our loyalty program will drive a one to one experience and unique access to the brand. We believe our loyalty program will be distinctive in the industry because we're not taking the typical transactional approach within our design the level of insight we have with our guests today plays a big.
Michael: Role in informing the execution elements of our loyalty program. We are excited to share more about our loyalty program in the coming quarters and intend to pilot the program in the fourth quarter of this year and plan for a system wide launch in 2026.
Michael: It's investments such as the ones. We've made in our digital technology platform that allow us to maintain our industry, leading unlevered cash on cash returns of 70%. Our brand partners enjoy is essential to a successful franchise system in the US is the unit economics, and we believe we.
Michael: Have the best in the industry, our supply chain strategy continues to provide a level of predictability into food costs that we have not seen in the past.
Michael: Coupling food cost predictability with our average unit volumes of more than $2 $1 million. Our brand partners are seeing cash flows at record levels and in turn they are investing behind their infrastructure and operations to scale their businesses alongside this growth.
Michael: The biggest testament to the strength of our unit economics, especially in this current macro environment is our brand partners demand for growth.
Michael: Average new restaurant volumes are on pace to exceed $1 $8 million in the latest latest vintage which compares to $1 $2 million just three years ago. We opened a record 126 net new restaurants in Q1 and updated our guidance to 16 to 17.
Michael: Percent unit growth in 2025. This implies net new units of between 410 to 435 globally as we mentioned last quarter, our global development agreement pipeline had over 2000 restaurant commitments at the start of the year this demand for growth.
Michael: <unk> continues to build and extends beyond our domestic business the.
Michael: The demand is just as strong in our international business, which also delivered strong Q1 results, we opened a new market and a marquee flagship location in Kuwait, which in its first week open broke the record for highest global weekly sales not only are we opening.
Michael: More restaurants, we're opening stronger than ever and there's incredible levels of pent up demand across the globe take our Puerto Rico market. For example, we opened our first restaurant in that market one year ago and already have nine restaurants opened with sales pacing ahead of the U S.
Michael: Average next on the Horizon is the launch of our Australia market with the first restaurant opening in Q2, we have a proven operator, who has set an opening over 100 restaurants in Australia with the potential for many more on our journey to opening over 10000 restaurants.
Michael: Cross the globe.
Michael: We now anticipate opening as many as five new markets in 2025.
Michael: Within the context of this more challenging macro operating environment I firmly believe that 2025 will be another proof point for the resiliency of our model and we will continue to deliver industry, leading returns for our brand partners and shareholders. We will remain disciplined on.
Michael: The investments that fueled this growth over the long term and are confident in our strategies. We are executing to scale wingstop into a top 10 global restaurant brand.
Alex: With that I'd like to turn the call over to Alex.
Alex: Thank you Michael Wingstop has undergone quite a transformational last couple of years that position us for our next phase of growth.
Alex: <unk> of scale by over $500000 from $1.6 million to over $2 $1 million in just two years.
Alex: We've opened nearly 700 restaurants since Q1 of 2023.
Alex: To frame the impact from development and showcasing our asset light model adjusted EBITDA is now more than $220 million on a trailing 12 month basis.
Alex: We enter the first quarter in a position of strength with the consumer while they are faced with an increased level of uncertainty.
Alex: This uncertainty however, does not change our strategies and where we believe our opportunities to invest and as Michael mentioned maximize returns for our brand partners and shareholders.
Alex: In the first quarter system wide sales increased 15, 7%, reaching one 3 billion our highest system sales recorded in a single quarter in our brand's history.
Alex: Our brand partners confidence in our strategies and our best in Class unit economics is evident in both our pipeline and our unit growth.
Alex: We opened over 400 net new restaurants in the last 12 months.
Alex: This growth creates a flywheel for us providing additional fuel for our advertising fund to invest behind our opportunity to chip away at a double digit GAAP and brand awareness.
Alex: In the first quarter total revenue increased 17, 4% to $171 million versus the prior year.
Alex: Royalty revenues franchise fees and other revenues increased by $11 $7 million in Q1 <unk>.
Alex: Driven primarily by 409 net franchise openings in the prior year comparable period.
Alex: 0.5% increase in domestic same store sales.
Alex: Company owned restaurant sales increased one $5 million in Q1 due to same store sales growth of one 4%, primarily driven by transactions and one net new restaurants versus the prior period.
Alex: In the first quarter, SG&A increased $6 $3 million versus the prior year comparable period.
Alex: It was $31 $4 million.
Alex: This increase was driven by investments to support the long term growth of the business through head count related expenses, plus $1 8 million of nonrecurring system implementation expenses as well as transaction costs related to the sale and the reinvestment of our interest in Lemon Pepper holdings, our brand <unk>.
Alex: In the U K.
Alex: The recent transaction by our brand partner Lemon Pepper Holdings was a great example of the value creation Wingstop model can provide another proof point of the brand's portability and industry, leading returns outside of the U S.
Alex: About three years ago, we invested a modest $4 million into lemon Pepper holdings and took a minority equity position in the business.
Alex: As a result of the closing of the sale of their business, we recognized a gain of $92 $5 million, which was recorded in the first quarter.
Alex: Confident in the long term opportunity within our UK business, we reinvested approximately $75 million of the proceeds.
Alex: Initiating a minority equity position into the newly formed acquisition entity.
Alex: We believe our international business continues to be supercharged for growth.
Alex: We see this as an example to maximize shareholder returns and plan to seek out similar investments around the globe as we open new markets.
Alex: Adjusted EBITDA, a non-GAAP measure was $59 $5 million during the quarter, an increase of 18, 4% versus the prior year.
Alex: This marked our largest first quarter on record and represents an increase of more than $25 million when compared to the first quarter in 2023.
Alex: Reported EPS for the first quarter is $3 24 per diluted share and more than 200% increase versus the prior year.
Alex: Note the quarter included a few nonrecurring items the net gain from the Lps transaction previously mentioned along with associated transaction costs and taxes, our system implementation costs and a loss on the sale of an office building.
Alex: After adjusting for nonrecurring items, we delivered adjusted earnings per diluted share and non-GAAP measure of 99.
Alex: A 1% increase versus the prior year.
Alex: This included a 19% EPS impact from the additional interest expense associated with their $500 million securitization transaction completed at the end of 2024.
Alex: We remain committed to enhancing shareholder returns on our last call, we announced our $500 million.
Alex: Share repurchase authorization program and to further demonstrate our commitment to shareholders. We entered into an accelerated share repurchase agreement to repurchase $250 million of our common stock that concluded prior to quarter end.
Alex: Throughout the first quarter the company repurchased and retired 830012 shares of its common stock at an average price of $257.
Alex: And <unk> 40.
Alex: Per share, which included open market repurchases.
Alex: At the end of the quarter $191 3 million remained available under our existing share repurchase programs.
Alex: Additionally on April 29, our board of directors approved a dividend of <unk> 27 cents per share of common stock a demonstration of the strength of our model.
Alex: This dividend totaling approximately $7 $5 million will be paid on June six 2025 to stockholders of record as of May 16 2025.
Alex: Now moving on to our outlook for 2025.
Alex: Our outlook is dependent on the macroeconomic conditions and with the heightened level of uncertainty we are basing this on the information we have today.
Alex: We are providing the following updates.
Alex: Domestic same store sales growth of approximately 1% for fiscal year 2025.
Alex: Previously low to mid single digits same store sales growth for.
Alex: For modeling purposes, our outlook reflects the trend at the start of the second quarter that is tracking to a same store sales declined by approximately mid single digits versus the prior year.
Alex: Which is primarily due to the strength of our last in the prior two years.
Alex: The second quarter as lapping the two year comp of 45, 5% almost entirely driven by transaction growth.
Alex: This compares to the first quarter lap a 41% on a two year basis.
Alex: As the lab for comps ease in the second half, we anticipate returning to growth through the third quarter.
Alex: Demonstrating the strength of our model and visibility into our pipeline at this point, our net new global unit growth rate is increasing to 16% to 17% previously 14% to 15%.
Alex: Net interest expense is now anticipated to be approximately $40 million previously $46 million.
Alex: This reduction is due to the interest income associated with our reinvestment in our UK brand partner.
Alex: Additionally, we are reiterating the following guidance.
Alex: SG&A is estimated to be approximately $140 million, which includes nonrecurring system implementation costs are $4 $5 million that will be an add back to adjusted EBITDA and approximately $26 million of stock based compensation.
Alex: As a result of these assumptions and for modeling purposes. This translates to an estimated adjusted EBITDA growth rate of 15% versus 2024 and is consistent with what we communicated in our last earnings call.
Alex: 2025 will be another testament to the resiliency of the Wingstop model, particularly given the current macro environment and the level of uncertainty.
Alex: Our strategies are working.
Alex: We're continuing to invest behind our strategy that will position us for sustained growth over the long term.
Alex: We're delivering predictable cost for our brand partners.
Alex: With this predictability along with Unlevered cash on cash returns of over 70% our brand partners are accelerating their development and opening more wings stops at a record level.
Alex: It's positioned us well on our path to becoming a top 10 global restaurant brand.
Alex: I want to thank our global support team members restaurant team members brand partners and supplier partners.
Alex: We believe we have the best team in the industry that will allow us to navigate the evolving economic backdrop, and we will remain focused on executing our proven strategies with that I'd like to now turn to Q&A. Operator. Please open the line for questions.
Alex: We will now begin the question and answer session.
Alex: To ask a question you May press Star then one on your telephone keypad.
Alex: If youre using a speakerphone please pick up your handset before pressing the keys.
Alex: To withdraw your question. Please press Star then two.
Alex: Please limit yourselves to one question and one follow up if you have additional questions you may reenter the queue.
Alex: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question today is from Jeffrey Bernstein with Barclays. Please go ahead.
Alex: Yes.
Alex: Great. Thank you very much.
Alex: My question is related to the comp outlook.
Alex: For 2025, you are now forecasting 1%.
Alex: So really no range at all after the low single digit to mid single digit just a couple of months ago, which was more like a 5% 6% type range. So.
Alex: Would think a line of sight is more limited today with the newfound macro headwinds I'm, just curious if you'd be willing to share color on.
Alex: Just to give some insight the sequential trends through the first quarter your expectation to a down 5% in the second quarter.
Alex: Kind of color you can provide.
Alex: Especially as again it seems like a fairly narrow full year targets any color you can provide on the second quarter and your assumption for the back half for you would be great and then I had one follow up.
Alex: Hey, Jeff Good morning, and thank you for the question I have as we went into this year. We obviously expected the first half to be tougher than the second half and it's really simply a function of the numbers, we're growing up against not just on a one year basis.
Alex: But on a two year basis.
Alex: And I think as you heard from a lot of other brands, who have reported we saw in the first quarter an impact associated with the fires in California, and then obviously the unseasonable winter weather, but as we exited Q1, we did see.
Alex: You know obviously, everyone saw a broader pullback in consumer confidence.
Alex: Navigating the uncertainty in the macro but as we referenced on our last call, but we really saw in our business wasn't something that was broad base necessarily we actually saw this more in specific pockets and it was pockets that.
Alex: Really kind of over indexed to the Hispanic consumer lower middle income.
Alex: And where we saw a meaningful pullback in our business, which as we look back over some prior instances in our in our 21 years of same store sales growth. This looks and feels similar to some of those pullbacks that we've seen in certain pockets, but again, it's not something that we're seeing broad based in our business and as we look at the.
Alex: Underlying health of our brand and compare this current environment to what we've seen before it does feel like a near term pullback.
Alex: So as we thought about our guidance and the current trend from Q1 into Q2, and then the balance of the year. It is primarily a function of the numbers, we're going up against and we remain extremely confident in the strategies that we're executing and the underlying health of the business.
Alex: Understood.
Alex: If youre able to nail this at the end of this year with a 1% comp you'll be viewed.
Speaker Change: Quite favorably in terms of your visibility.
Alex:
Speaker Change: My follow up question is just on the the franchisees.
Speaker Change: Presumably most are very happy with the sales growth the past two years.
Mentioned, the 70% cash on cash returns they are generating.
Speaker Change: That said you think the current environment would be quite challenging. So I'm wondering if you could talk a little bit about the recent conversations you've had with franchisees what are they most focused on the fact that you are able to raise your unit growth guidance. This year.
Speaker Change: In an environment like that.
Speaker Change: Impressive just curious to hear whats on franchisees mind as they think about accelerating growth. Thank you.
Speaker Change: Yeah. Thank you Jeff for that question, it's a great one.
Speaker Change: And in full transparency theres not a lot of conversations with our brand partners that are centered around same store sales growth. They look at their business a little bit differently.
Speaker Change: As Alex mentioned in his prepared remarks over two years, our <unk> have grown $500000 and at that same time, we've advanced our supply chain strategy to predict to create predictability in Hood test and Thats actually translated to their returns just strengthening and so the conversations we're having with our brand.
Speaker Change: <unk>.
Speaker Change: Really center around unit growth and I think you saw that show up in a big way in Q1, a record quarter for us.
Speaker Change: Something we're really proud of and as we look at our pipeline today and the demand for growth from our brand partners, who are taking their capital and investing it in wingstop.
Speaker Change: It gives us a lot of confidence to sit here and see.
Speaker Change: What is shaping up to be a record year from a development perspective, and so those conversations are really centered around access to more of a territory more unit growth and it really gives us confidence in that long term opportunity, we see in front of us to take a brand that's at over 2600 units today and scale it to.
Speaker Change: Over 10000 globally.
Speaker Change: And Geoff this is Alex just to add one point, we had about 50 different brand partners open a restaurant in the first quarter and we opened a restaurant in 11 different markets 33 States. So I think that's a good testament to this strategy, we're working at the market level to execute our playbook on development.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question is from David Tarantino with Baird. Please go ahead.
Speaker Change: Yeah.
Hi, Good morning. My question is about the smart kitchen, and what Youre seeing there I was I was hoping maybe you could give us a bit more.
Speaker Change: Insight on like.
Speaker Change: The comps impact or the sales impact when you roll it out as a relatively immediate that you see the benefits and you know or does it take time to play out given consumers may not notice it right away.
Speaker Change: Any color you could offer there.
Speaker Change: <unk> you know if you're willing to talk about maybe the magnitude of what you're seeing in terms of the sales lift.
Speaker Change: Thanks.
Alex: Good morning, David This is Alex.
Speaker Change: Yes, we had about to start the year about half of our company owned restaurants operating with the Wingstop Smart kitchen, and Youre right. There is a little bit of a lag because we're not advertising, we're not actively telling consumers about the change, but what we're measuring as the restaurants get more time and demonstrate that consistency and speed and that high.
Speaker Change: Quality indulge experience, we can deliver we are seeing a positive divergence in sales trends versus control restaurants for the ones that had been operating with the smart smart kitchen.
Speaker Change: I'll give you. Another example, as well we just completed the rollout of this past quarter of our Dallas Fort worth market and we initiated a small test within our delivery marketplaces same creative same promotion relative to markets outside of the Dallas Fort worth area, and we saw a 5% increase.
Speaker Change: Early on and conversion and the Dallas restaurants relative to those markets outside of Dallas. So we're really encouraged early on by what we're seeing we're measuring a consistent we're seeing increased guest satisfaction scores because we're delivering that consistent in that faster service time for our guests.
Speaker Change: Great and I guess, a follow up is this factored into your second half outlook is there as you roll this out or I guess.
Speaker Change: I guess theres going to be questions about how you accelerated from what Youre running now into the back half and I know you mentioned that comparisons but is this one of the reasons to believe that outlook is achievable.
Speaker Change: Yes, David I think as we thought about the outlook for this year.
Speaker Change: It really contemplated the strategies that we're executing against around continuing to expand brand awareness and E.
Speaker Change: Thank you saw the strength of our unit growth really show up in a big way in Q1, where comps grew by a half a percent.
Speaker Change: But based on the unit development number we delivered system sales grew by 16%, giving US continued dollars into a fund to drive brand awareness.
Speaker Change: And you will continue to work down to things like tenders and menu innovation and the opportunity. We have there that we think is going to perform.
Speaker Change: And that consumer behave very similar to what we saw with chicken sandwich and gives us a lot of excitement. There. We can talk about our L. T O calendar and what's coming there from a flavor perspective that we're excited about to drive indulgent occasions.
Speaker Change: And then obviously digital continuing to acquire new digital guests continue to target our marketing to those guests with the right message to the right mediums and then obviously personalization and so we feel confident that our strategies that we're executing our proven and something that will allow us to deliver on that comp number.
Speaker Change: That that we shared and it's really just kind of a function primarily of the easing of the compares that we see returning to positive growth in the back half of the year that said to your initial question that guidance does not contemplate a benefit associated with the Wingstop smart kitchen, and we're excited about.
Speaker Change: What that means for our business not only just near term, but long term, we see it as a true game changer. Our brand partners are excited and we mentioned on the call that we're over 200 restaurants at the end of Q1, but the rollouts pacing nicely and by the end of this week, we're gonna be at roughly 400 restaurants that have the smart kitchen solutions.
Speaker Change: Alright, Thank you very much.
Danilo: The next question is from Danilo <unk> with Bernstein. Please go ahead.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: So first of all I'd like to ask something about the international expansion. So can you talk a little bit more about the new type markets of entry and how far along are you on the launch and expanding Wingstop in China, and then specifically like how much of the 10000 unit growth potential depends on especially in China.
Speaker Change: Good morning, and thank you for the question.
Speaker Change: You've heard us over over the years recent years talk about our international business being supercharged for growth and.
Speaker Change: We're really excited about the momentum that we have in the business. There. The business continues to perform well from a same store sales perspective, it is performing stronger than our U S business, which we're excited to see we reference.
Speaker Change: Record opening.
Speaker Change: In Kuwait this last quarter that we're really excited about.
Speaker Change: And then if you look at just from a unit development perspective, we had a record for our international business on a net new units perspective for Q1.
Speaker Change: Out of any quarter, and we're excited about that and I think it speaks to the strength of that business. The strength of our strategy. We have opened a couple of new markets in the GCC that are performing great. We've referenced Australia is another market that's coming online later this quarter.
Speaker Change: And then we do have additional markets that we haven't announced yet that are close.
Speaker Change: That we anticipate opening this year as well in China. It remains a big opportunity for us.
Speaker Change: And it's obviously something we're navigating in a very thoughtful and intentional way, particularly when you consider this current macro or this current geopolitical environment.
Speaker Change: But we still remain confident in the long term that that's a meaningful opportunity for us and for Wingstop and we've done a lot of work.
Speaker Change: Around understanding that consumer understanding the brand positioning and understanding the partner landscape.
Speaker Change: In there, but it's nothing that I would say is is being prioritized right now in light of the current geopolitical environment, but I think another opportunity that we're equally excited about is India.
Speaker Change: That we think can be a pretty meaningful opportunity for wingstop and is a big part of that overall 10000 global unit opportunity.
Speaker Change: Yeah.
Speaker Change: Great.
Speaker Change: And then the tenders I mean, the relaunch of tenders.
Speaker Change: Seems to be an opportunity to supercharge your lunch day part.
Speaker Change: <unk> been more kind of a handheld syndrome. So the chicken sandwich. So can you share the early learnings from the relaunch, how you're planning to integrate into menu expansion and target new consumer occasions, and then if you can also comment on the strategic positioning to differentiated in light of potentially.
Speaker Change: Competing launches like Mcdonald's and others. Thank you.
Speaker Change: Yeah, we're really excited about tenders.
Speaker Change: And we're we think it's a.
Speaker Change: A meaningful opportunity for us.
Speaker Change: We referenced the launch the <unk>.
Speaker Change: Relaunch, if you will of our new crispy tenders in Q1, and we're extremely excited about the early results. We're seeing we referenced that in March we saw a record level of new guest guest acquisition.
Speaker Change: Which I think just speaks to the opportunity we have in front of us and as we look at these new guests that are coming into our brand via tenders, they look and behave a lot like those chicken sandwich guests that we brought in and what we saw were those chicken sandwich guests typically came in as an individual eater occasion.
Speaker Change: But then it came back and learn to navigate the rest of the menu more of a group occasion, and Wingstop became more of their overall consideration set and we see the same opportunity with tenders and that's what gives us a lot of confidence in.
Speaker Change: The opportunity we have there is what we're seeing in the early data and how the consumers engaging with us and we think just like sandwich, we can differentiate really well in the marketplace. Because most places give you one tender and one dip at Wingstop you can get it sauced and tossed in our 12 bold and unique flavors.
Speaker Change: As well as our iconic ranch or blue cheese, and so we think we have a real opportunity to win our fair share of tender occasions, and we feel like we're just scratching the surface there as far as day part mix, we've actually seen our tender yourselves for since the relaunch.
Speaker Change: It'd be pretty balanced across day parts, which we're encouraged by and so we think theres balanced growth and continued opportunities for us to win more occasions, but then also focus on the data that were obtained on these new guests and driving them for that repeat visit and they are continuing to work them up the frequency curve similar to what we did with sandwich.
Brian: The next question. The next question is from Brian <unk> with Morgan Stanley. Please go ahead.
Brian: Yes, thanks, good morning, guys.
Brian: As I recall.
Brian: Back in I think the way Youre thinking about this year.
Brian: Looks kind of like 2022.
Brian: As I recall at that point.
Brian: Yeah.
Brian: We were all worried about a recession in the first half of the year and I think you called out kind of some similar customer groups that had pulled back.
Speaker Change: Is that is that the case or I guess I was under the impression that maybe there were some shifts in sort of your customer base since that time.
Brian: How is that different.
Brian: Different versus a few years ago, you know for better for worse.
Brian: Yeah, Brian I think I think you said it well.
Brian: That is that is what it looks like we see in the business today and this and the data we have and what we're tracking it looks like very similar behavior to what we saw in 2022 as an example, and that's where the consumer in certain pockets demonstrated a near term pullback.
Brian: And then things things normalize after a period of time I think for US today, our customer base has evolved a little bit.
Brian: Obviously, we brought in and what we've talked about is a lot of.
Brian: But yes, those heavy <unk> guests that look a little bit different than our traditional guests a little bit higher income a little bit.
Brian: Les ethnically diverse and engaged prefer to engage with brands digitally in and off premise through the delivery channel and so we have seen a little bit of a diversification in.
Brian: In our in our customer base, but what we and because of that I think it's why we commented that we're not really seeing this broad based but more specifically in pockets. There are areas of our business that are performing quite well in this environment and so I think for US. It does feel like this is kind of a little bit of a temporary near term pullback.
Brian: In certain pockets that we feel comfortable we can navigate again I would say the big difference.
Brian: 2022 is just the strength of the compares that we're going up against.
Brian: Yeah, Okay makes sense.
Brian: How does delivery fearing within.
Brian: It is growing faster is going growing slow right now like what are you seeing in delivery trends and I guess you you cite that as something you want to continue to grow how or how are you going to be doing that actively.
Brian: Here.
Brian: Yeah, Brian I think we've seen pretty consistent growth in the delivery channel.
Brian: It continues to perform well for us and I think it really step speaks to just the overall opportunity we have in that channel, where we know that we're still just scratching the surface with if you look at the number of eaters on Uber eats platform more door dash platform that have engaged with our brand.
Speaker Change: We see a ton of opportunity there and I think Alex mentioned it earlier, when we talked about the Wingstop smart kitchen, but.
Speaker Change: In DFW, we are seen a little bit of an early indication in that opportunity, we have where when.
Speaker Change: When we when we get below a certain threshold on delivery time, you're just you're in the consideration set and so the same creative the same AD and a market with a faster delivery time, we're seeing a much higher conversion rate on that and that shows to us is a pretty strong proof point of the opportunity.
Speaker Change: Have with delivery.
Speaker Change: Thanks.
Speaker Change: Yes.
Speaker Change: The next question is from Andrew Charles with TD Cowen. Please go ahead.
Andrew Charles: Great. Thank you so much.
Andrew Charles: I understand the message is that the softness youre seeing the consumers really in pockets, but given success. The development strategy based on the strength of your franchisee cash flows Im wondering if youre seeing a more pronounced impact of sales transfer our mature stores as franchisees have increased desire to take advantage of the brand's robust cash on cash returns. So maybe just said different.
Andrew Charles: Can you speak to how much sales transfer drew absorbing Sydney observing within reported same store sales versus what you may have observed a year or two ago, and then I have a follow up.
Andrew Charles: Yeah, Andrew Good morning, and thank you for the question I think what I would say is.
Andrew Charles: We've talked about just the number of restaurants in our in our portfolio today that are already above that $3 million <unk> I think it's roughly 10% a little bit more than that and we've talked over the years. How there are instances, where our brand partners will be intentional about.
Andrew Charles: Taken some pressure off of some really high volume restaurants, and that allows them to maximize their overall.
Andrew Charles: Turns on investment, but also provides a.
Andrew Charles: A solid guest experience and improved overall operations for the team and so I would say that continues to happen and as we look at and its natural in this environment to take a hard look at what's driving the trends youre seeing in the business and I would say as we look at any sort of impact as it relates to new restaurants opening.
Andrew Charles: On the overall business and the overall comp, it's not a material change or anything to call out from what we've seen historically I think again, it's really points back to these pockets of.
Andrew Charles: Certain certain cohorts that are that are primarily a Hispanic consumer lower middle income, where we are seeing a bit of a temporary pullback in overall restaurant purchases.
Speaker Change: Okay. That's very helpful. Thanks, My other question was just.
Speaker Change: Around the CRM and now the loyalty program coming online. It was about five months ago that you were able to start doing the CRM efforts to about 50 million E Mail database users. So I'm curious what the learning was to make this into a form of loyalty program rather than to continue with the CRM efforts that you have in place.
Speaker Change: Yeah, Andrew good. Good morning. This is Alex it's a little bit of both we're going to continue to work our hyper personalization strategies and as we think about our demand space to win our fair share of that opportunity to go from 1% to 20%.
Speaker Change: This is a good example of an intentional lever we have in our business and the hyper personalization strategies with wing. It are the foundation for how we can inform and drive the design of our loyalty program. We're almost coming at this from a completely different angle from other brands in the industry because of the wealth of information insight.
Speaker Change: Have a good example is the largest cohort we've seen in new guest acquisition has been that Gen Z and millennial consumer and we know they embrace brands that provide some type of experiential aspect to their engagement and so our loyalty program is something we see as a way to enable that.
Speaker Change: And it's something we've been working on again tied back to our strategies over the last couple of years as we've seen our business scale and an opportunity for us to move down that move up that path to $3 million avs.
Speaker Change: Thank you very much.
Chris: The next question comes from Chris <unk> with Stifel. Please go ahead.
Speaker Change: Yeah. Thanks, Michael you mentioned Hispanic consumers have pulled back and that you have seen this in the past I guess what is the playbook to address this challenge I mean did you weather the storm over there some proactive actions that you executed to improve results in those markets that over index with that segment.
Speaker Change: Yes, Chris It's a great question and I think again, it really speaks to the visibility we have into our business and the strength of that database with over 50 million users strong. So it does allow us to to get very targeted and very specific and understand how to attack the current business.
Speaker Change: And what we're seeing in these markets and it's not a one size fits all so we we do exit we are executing very specific tactics that are that are that are addressing these pockets, where we are seeing softness in it really anchors back to ultimately solving for creating.
Speaker Change: A reminder, if you will but just that top of mind consideration around that that indulgent wingstop occasion, which again, we're not a high frequency occasion, and we've demonstrated over our 21 years of same store sales growth our ability to keep those indulgent occasions, and so for US. It's the right messaging is through the right.
Speaker Change: Medium and.
Speaker Change: And then obviously in the instances, where we can present value to a customer who is a little bit more sensitive to this current macro environment, we're going to lean in and do that as well, but it really go all letters back to that indulgent Wingstop Acacia.
Speaker Change: Great and then I had a follow up on the rollout of the kitchen system.
Andrew Charles: Just given the lower frequency of the brand you see how do you envision helping guest realized that times have improved I mean, I understand quote times on three P platform should be lower but is there anything you can do to help raise awareness that guess, maybe getting their orders twice as fast as they used to.
Christian Thomas: Yes, Chris it's a it's a great question and I would really think of it in two buckets you have to remember.
We are still one of the largest brands that nobody's ever heard of we have a 20 point gap and brand awareness. There's a lot of people, who do not engage with our brand yet and so for them. This will be the only experienced they know and so we will naturally and organically just become more of their.
Christian Thomas: <unk> set because we're delivering on both speed and consists in a consistent experience.
Speaker Change: I'm in and time out as it relates to existing guests again, Alex talked about this a little bit earlier as we lined out our strategy over the next few years, we thought about loyalty as being a great way for us to just drive consideration with the consumer around certain occasions in certain ways to become.
Speaker Change: More of their consideration set we're not going to go out there and tell people, we're faster now and more consistent but we're going to find ways to drive wingstop.
Speaker Change: The top of their consideration set for certain occasions that we believe we have the right to win and then it's about delivering on those expectations.
Speaker Change: Great. Thanks, guys.
Speaker Change: The next question is from Andy Barish with Jefferies. Please go ahead.
Speaker Change: Hey, guys. Good morning, one question and a quick follow up just I.
Speaker Change: I guess I missed or didn't realize you bumped up the AD fund at the beginning of the year another 50 bps.
Speaker Change: Is this can you just kind of give us an update on sort of what the focus of that was as an NBA stop are you generating the kind of returns you like there.
Speaker Change: Is there a focus maybe on more individual eater occasions, just given some of the things that you've mentioned prior on the economy and uncertainty.
Speaker Change: Andy.
Speaker Change: Last year, when we launched.
Speaker Change: My Wingstop platform, we upped the overall advertising fund by 30 bps.
Speaker Change: And that was to cover the operating expense for the my Wingstop platform and going into this year, we stair stepped that up to the 50 bps you referenced so another 20 bps to five 5% total add fun, but that all the inquiry.
Speaker Change: Entirely represents the funding of the operating expense associated with my Wingstop, but as we mentioned before with our double digit growth in system wide sales, we're continuing to grow our AD fund and we're super excited about what we're seeing with with our advertising with the endy.
Speaker Change: The partnership that we're stepping into and.
Speaker Change: We're not running nearly as many spots as as other brands are but yet we were the most recognized brand in the NBA. This season, and so that tells US our advertising is working really hard for us and we're excited about some of the end game moments, we're able to take advantage of through that partnership and so we're taking that we're taking.
Speaker Change: What we've learned last year.
Speaker Change: Around starting to expand in a partnership with the WWE and now we're looking at the UFC and those guests for both of those are those audiences for both of those.
Speaker Change: Areas are our our guests that don't know wingstop have a low level of awareness, but look a lot like our core guests and who we're targeting and so we're excited about the strategy and how it's working for us and I think it's showing up in our brand health metrics.
Speaker Change: And it gives us a lot of confidence in our ability to navigate this year.
Speaker Change: Yes, just a quick follow up for Alex.
Speaker Change: Don't want to get too much into semantics, but you said kind of a.
Speaker Change: Return to same store sales growth through the three Q, so I'm going to I guess ask it just does that mean you expect the <unk> to be positive on a on a same store sales basis.
Christian Thomas: Yes, Andy we're not going to guide to the quarter, but I think about the second half is something on a three year basis based on what we guided to that would imply a three year in the second half within the high 30% range.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks for the help guys.
Speaker Change: The next question is from Sara Senatore with Bank of America. Please go ahead.
Speaker Change: MS. Senatore. Your line is open on our end, perhaps you havent muted on yours I'm sorry, Thank you yes.
Sara Senatore: Just on the first question and then I do have a yet another question on on the same store sales stack that you were talking about you mentioned that you had positive transaction growth, which I guess implies negative ticket. If you could just talk about what.
Speaker Change: What might be driving that mix is it just fewer group orders, which would be perhaps positive because it's growth in sandwiches and tenders.
Speaker Change: Or less attach or anything on value you have you done more kind of sharper price points around some of the value offers.
Speaker Change: Hi, Sir Michael mentioned, a bit I think what this points to what you saw in the quarter relates to this individual either occasion that we're attracting with tenders on their initial purchase.
Speaker Change: That ticket is obviously, a smaller average ticket size and what we see from a traditional group occasion that we typically anchor till we saw a little bit of this dynamic with chicken sandwich. When we first launched that so that's really what we're what at points during the first quarter regarding the ticket.
Speaker Change: Alright, so not not value or.
Speaker Change: <unk> management.
Speaker Change: No.
Speaker Change: Okay, and then just on the.
Speaker Change: On the stack and do you plan to three year I guess, if I look at the two year stack I mean, the implication would be that it is very stable. So I'm you know if you're down mid single digits that compare sequentially gets you know.
Speaker Change: About which are mid single digits harder, 1% comp for the full year is yes, I think right roughly 22% Q here.
Speaker Change: So I guess the question I have is.
Speaker Change: Is that sort of.
Speaker Change: The key or rather than the three are perhaps more indicative and.
Speaker Change: If so presumably it's going to vary around that trend. So I think April was your toughest compare.
Speaker Change: Last year the quarter. So just trying to sort of think through obviously everybody is looking at kind of some of the same data that you are.
Speaker Change: Yes, I think you said it varies a bit around that.
Speaker Change: Areas around the compare.
Speaker Change: And so I think what I would think about it is just that that three year stack comp as I mentioned in the in the second half.
Speaker Change: Okay. So even though the three year decelerates in the second half, you're saying high thirties, I guess may be if you add it.
Speaker Change: What you are looking to okay. Thank you.
Christine Cho: The next question is from Christine Cho with Goldman Sachs. Please go ahead.
Christine Cho: Yes. Thank you so much a quick follow up on the tender mix I recall previously was around low single digit but are you seeing any meaningful uptick here post the recipe upgrade as well as the March Madness campaign, and how do you size the opportunity relative to chicken sandwich, Frank Stan Thank you.
Christine Cho: Yeah, Christine we are really encouraged by the early results with our tenders relaunch.
Christine Cho: And we've seen that sales mix, obviously spike similar to what we did with sandwich. When we initially launch sandwich and it's now mixing tenders are now mixing higher than sandwich, and we're encouraged by that but we know there is a meaningful opportunity for us to win our fair share.
Christine Cho: Tinder vacations and again, it's a great entry point into our brand that consumers, who aren't familiar with wingstop or either don't really understand how to engage with us outside of maybe a special occasion.
Christine Cho: Exactly what we saw with chicken sandwich and Thats, what were seeing with that record guess number of guests new guests we acquired in the month of March.
Christine Cho: So all early indications are really encouraging and we're excited about the opportunity we have with tenders.
Christine Cho: Yeah.
Christine Cho: Yeah.
Christine Cho: This concludes our question and answer session I would like to turn the conference back over to Michael Skipworth for any closing remarks.
We just want to thank everybody for their time this morning, and as we take a step back and look at our business the underlying health of our business.
Christine Cho: We see record development momentum, we see accelerating brand strength, we're expanding digital engagement.
Christine Cho: And menu innovation combined with our new Wingstop smart kitchen operating platform that unlocks new occasions, it's hard to not see a path to $3 million or <unk> in over 10000 restaurants globally.
Christine Cho: Thank you.
Christine Cho: Okay.
Christine Cho: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.