Fast-food chain Wingstop (NASDAQ:WING) missed Wall Street’s revenue expectations in Q4 CY2024, but sales rose 27.4% year on year to $161.8 million. Its GAAP profit of $0.92 per share was 5.3% above analysts’ consensus estimates.
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Wingstop (WING) Q4 CY2024 Highlights:
- Revenue: $161.8 million vs analyst estimates of $165 million (27.4% year-on-year growth, 1.9% miss)
- EPS (GAAP): $0.92 vs analyst estimates of $0.87 (5.3% beat)
- Adjusted EBITDA: $56.35 million vs analyst estimates of $51.63 million (34.8% margin, 9.1% beat)
- Anticipates ~17% year-on-year revenue growth in 2025, short of analyst estimates of ~20%
- Operating Margin: 25.9%, up from 23.5% in the same quarter last year
- Locations: 2,563 at quarter end, up from 2,214 in the same quarter last year
- Same-Store Sales rose 10.1% year on year (21.2% in the same quarter last year)
- Market Capitalization: $8.89 billion
"2024 results demonstrated the strength and staying power of our strategies we are executing against, translating into another record year. We reached new highs with domestic AUVs of $2.1 million and opened 349 net new restaurants - a remarkable 15.8% growth rate, demonstrating the strength of our unit economics and confidence in our strategies by our Brand Partners," said Michael Skipworth, President and Chief Executive Officer.
Company Overview
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Modern Fast Food
Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
With $625.8 million in revenue over the past 12 months, Wingstop is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, it can grow faster because it’s working from a smaller revenue base and has more white space to build new restaurants.
As you can see below, Wingstop’s sales grew at an incredible 25.9% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Wingstop generated an excellent 27.4% year-on-year revenue growth rate, but its $161.8 million of revenue fell short of Wall Street’s high expectations.
Looking ahead, sell-side analysts expect revenue to grow 20.2% over the next 12 months, a deceleration versus the last five years. Still, this projection is healthy and indicates the market is baking in success for its menu offerings.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.
Wingstop sported 2,563 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 13.4% annual growth, among the fastest in the restaurant sector. This gives it a chance to scale into a mid-sized business over time. Additionally, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Wingstop provides support.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.
Wingstop has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 19.3%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.
In the latest quarter, Wingstop’s same-store sales rose 10.1% year on year. This growth was a deceleration from its historical levels, showing the business is still performing well but losing a bit of steam.
Key Takeaways from Wingstop’s Q4 Results
We were impressed by how significantly Wingstop blew past analysts’ EPS and EBITDA expectations. On the other hand, its same-store sales, revenue, and full-year revenue guidance fell short of Wall Street’s estimates, making this a softer quarter. The stock traded down 7.7% to $283 immediately following the results.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.