Wingstop(WING) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, company-owned restaurant sales increased by $5.3 million due to a 2.6% increase in same-store sales, primarily driven by transaction growth [5] - The cost of sales as a percentage of company-owned restaurant sales decreased by 900 basis points in Q4 compared to the prior year, driven by lower food costs, particularly a 49% decrease in the cost of bone-in chicken wings [5] - The company ended Q4 with$ 526.8 million in net debt, with a net debt to trailing 12-month adjusted EBITDA ratio of 4.8x, which is 1.5x lower than at the end of the first quarter [6] Business Line Data and Key Metrics Changes - The company opened 228 net new units globally in 2022, representing a 13.2% growth rate, achieving record years for both domestic and international businesses [111] - The average unit volume (AUV) is above $1.6 million, with food costs in the low 30% range [112] - The company anticipates maintaining an increased pace of development with approximately 240 net new units in 2023, translating to over 12% unit growth compared to the prior year [7] Market Data and Key Metrics Changes - The company reported a favorable commodity outlook for 2023, with full-year cost of sales expected to be approximately 75%, improving by over 300 basis points year-over-year [129] - The digital sales generated nearly$ 1.7 billion in 2022, showcasing the strength of the company's digital platform [116] - The company is seeing strong growth in delivery, with the potential to double the size of its delivery business [116] Company Strategy and Development Direction - The company aims to achieve a target of $2 million-plus AUVs, leveraging brand awareness, menu innovation, and expanding the delivery channel [122] - The launch of the chicken sandwich in 2022 is seen as a significant growth opportunity, targeting over 160 million chicken sandwich consumers [115] - The company is focused on building brand awareness through increased advertising, with a 40% growth in the national advertising fund in 2022 [114] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating 2023 despite macroeconomic uncertainties, supported by a proven strategy that has delivered 19 consecutive years of same-store sales growth [113] - The sentiment among brand partners is positive, with strong unit economics and excitement for continued growth [11] - The company is proactive in addressing supply chain challenges and has made significant investments to mitigate volatility in food costs [14] Other Important Information - The company has launched a capability for guests to donate to Wingstop Charities through rounding up their checks, which is expected to triple the grants provided to date [127] - The company is expanding into new international markets, with early successes in Canada and Korea [117] Q&A Session Summary Question: How has the year started and what is the outlook for comps? - Management indicated that the company is well-positioned with strong transaction growth and confidence in achieving mid-single-digit same-store sales growth for 2023 [2][23] Question: Will franchisees take any price increases this year? - Management expects to return to a disciplined pricing approach, with a historical pattern of 1 to 2 points of price increases [29] Question: What is the impact of the chicken sandwich on customer frequency? - The chicken sandwich has proven to be highly incremental, driving frequency and attracting new guests [60][62] Question: How is the company addressing supply chain challenges? - Management is actively engaging with potential partners to minimize volatility in food costs and has made proactive investments in supply chain strategies [96] Question: What are the expectations for delivery sales and boneless sales mix? - The company is seeing delivery sales grow and anticipates the boneless mix to reach all-time highs, approaching 40% [87][88]