Wingstop(WING) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2022, the company reported a same-store sales growth of 1.2%, which is 32% on a three-year stacked basis, resulting in average unit volumes (AUVs) exceeding $1.6 million [26][37] - Adjusted EBITDA for Q1 2022 was $22.1 million, a decrease of 7.6% year-over-year, with adjusted earnings per diluted share at $0.34 [45][52] - The cost of sales as a percentage of company-owned restaurant sales increased by 870 basis points compared to the previous year, primarily due to increased labor investments and pre-opening expenses [41][44] Business Line Data and Key Metrics Changes - The company opened a record 60 net new restaurants in Q1 2022, increasing the unit outlook for the year to over 220 net new restaurants [17][22] - New restaurants are producing average unit volumes of $1.3 million as they enter the comp base, compared to just over $900,000 for the 2019 vintage [38] Market Data and Key Metrics Changes - International same-store sales growth was 23.8% in Q1 2022, with the UK market demonstrating strong performance [23][24] - The spot market price for wings decreased from a record $3.22 per pound in 2021 to $1.64 per pound, providing a favorable commodity backdrop for the company [21][43] Company Strategy and Development Direction - The company aims to sustain same-store sales growth, maintain best-in-class returns, and accelerate development to become a Top 10 global restaurant brand [7][34] - The strategy includes a technology-forward approach and significant investment in brand awareness, with the national ad fund expected to exceed $120 million in 2022 [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted that while inflationary pressures exist, significant deflation in wing prices is expected to offset some inflationary impacts [20][22] - The company updated its domestic same-store sales guidance to low single digits, reflecting confidence in its strategies despite a volatile environment [32][50] Other Important Information - The company completed a securitized financing transaction, issuing $250 million in securitized notes and a $200 million variable funding note facility, which will support strategic initiatives and return capital to shareholders [46][49] - A special dividend of $4 per share was declared, totaling approximately $5.1 million, to be paid on June 10, 2022 [49] Q&A Session Summary Question: About same-store sales trajectory and internal factors - Management attributed the slowdown in March primarily to external factors, including strong comparisons from the previous year and a shift in consumer behavior towards dine-in occasions [56][58] Question: Expectations for comps progression - Management anticipates a softer comp in Q2, potentially flat, but expects improvement as the year progresses due to easier comparisons and growth levers [60][62] Question: Insights on menu pricing and consumer behavior - Management indicated that the pricing element is expected to taper off as the year progresses, with confidence that macroeconomic factors are influencing consumer sentiment more than pricing strategies [72][75] Question: Update on supply chain strategy - Management expressed confidence in the favorable commodity environment for wings and indicated ongoing efforts to take more control of the supply chain to minimize cost volatility [78][80] Question: Demographics and customer behavior - Management noted progress in diversifying the customer base, with both lower-income and more affluent consumers showing a pullback in frequency due to external economic pressures [95][96] Question: Product innovation and menu strategy - Management confirmed ongoing excitement about product innovation, particularly around flavors, and emphasized the importance of demonstrating value to consumers [102][114]