Wingstop Inc. (WING) shares took a tumble on Wednesday after the company reported third-quarter earnings that fell short of Wall Street’s expectations. While the company’s revenue came in higher than anticipated, a miss on earnings per share and rising costs sent investors scrambling for the exits, pushing the stock down by a significant 17.7%.
The company reported earnings per share of 88 cents, missing the analyst consensus estimate of 95 cents. However, Wingstop’s quarterly sales of $162.498 million did exceed the analyst consensus estimate of $161.535 million. This revenue growth was driven by a combination of strong domestic same-store sales and expansion through new franchise locations.
One of the key factors driving Wingstop’s revenue growth was a remarkable 20.9% increase in domestic same-store sales. This contributed $9.6 million to the company’s royalty revenue, franchise fees, and other income. Furthermore, the company added 10 net new locations since the previous quarter, resulting in a 7.3% increase in company-owned domestic same-store sales, primarily driven by higher transaction volumes.
However, rising costs, particularly for bone-in chicken wings, weighed heavily on Wingstop’s profitability. The cost of sales as a percentage of company-owned restaurant sales climbed to 77.8% from 73.6% in the prior year. This increase in costs was a major contributing factor to the earnings miss.
Despite the disappointing earnings, Wingstop remains optimistic about its future prospects. The company reaffirmed its guidance for approximately 20% domestic same-store sales growth for fiscal year 2024. Additionally, it updated its guidance for global net new units to 320-330, up from the previous range of 285-300. This indicates that Wingstop is continuing to invest in expanding its footprint and driving growth.
In a move to reward shareholders, Wingstop declared a quarterly dividend of $0.27 per share of common stock, resulting in a total dividend payout of approximately $7.9 million. This dividend will be paid on December 6.
While Wingstop’s third-quarter results were met with disappointment, the company’s strong sales growth and continued expansion plans suggest that it remains a force to be reckoned with in the fast-casual dining industry. Investors will be closely watching to see how Wingstop navigates the challenging economic environment and manages its rising costs in the coming quarters.
