Wingstop weathers fast food slump with 300% stock price gain over 5 years and NFL season on the way
As McDonald’s and Starbucks struggle with declining sales, one fast-food chain is booming. Wingstop, a Dallas-based fast-food chain that’s been in business for 30 years, is well positioned to weather “any macroeconomic environment,” according to analysts at Wedbush Securities. In the meantime, the company is poised for a boost when the NFL season, the season when chicken wings are most consumed, begins next month.
Wingstop Inc., which trades on the Nasdaq under the ticker symbol WING, remains “particularly well-positioned within the sector to deliver above-average transaction growth over the near, intermediate and long term,” analysts Nick Setyan and Michael Symington wrote in an Aug. 1 note to investors. Wedbush maintained an outperform rating and a 12-month price target of $425. In the past month alone, WING has risen at least 10%, reaching about $406 as of Tuesday afternoon.
More broadly, Wingstop has seen its share price rise by nearly 300% over the past five years.
Analysts also said the volatility in wing costs was “clearly behind us.” Strong demand and limited supply led to “historic increases” in wholesale and retail prices for chicken wings during peak periods in 2021 and 2022, according to a report from the U.S. Department of Agriculture.
Wholesale prices for chicken wings peaked at $3.25 per pound in May 2021, but retail prices have continued to climb. “At the start of the 2022 March Madness basketball tournament, the national average retail price (prices advertised in grocery store flyers) was estimated at $4.29 per pound.” But the cost of chicken wings dropped by about 39% between the 2022 Super Bowl season and the 2023 Super Bowl.
What did Wingstop do to survive the volatile period? “They used to buy wings on the spot market, so a month in advance,” Setyan said. Fortune“They now have longer term contracts in place for the majority of their wing requirements.”
Wingstop Inc. reported results on July 31 for the second quarter of its fiscal year ended June 29. The company opened 73 new restaurants and generated adjusted EBITDA of $51.8 million, representing a growth rate of 50.7% over the prior year. Total revenue increased 45.3% to $155.7 million.
During the quarter, systemwide sales increased 45%, providing “additional firepower to our advertising fund” to invest in expanding brand awareness, Wingstop President and CEO Michael Skipworth said on the earnings call. Sports advertising may be a key area as Wingstop benefits from the strength of the NFL football season leading into March Madness basketball.
“I think sports will continue to help, especially from a marketing perspective,” Setyan said. As Wingstop continues to buy more ads during NFL and NBA seasons, for example, “that should allow them to close the brand gap with their (fast-food) peers,” he said.
The company celebrated its 30th anniversary in July. Michael Skipworth, chairman and CEO, shared his perspective on the earnings call. “Over the last 30 years, our brand hasn’t changed much,” Skipworth said. “We’ve added boneless wings, tenders and the chicken sandwich.” The company has remained focused on its “simple operating model” and delivering “cooked-to-order, tender wings blended with our bold, signature flavors,” he said.
This article originally appeared on Fortune.com
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