Shares of casual dining restaurant chain Wingstop (WING 59.04, +8.73, +17.35%) grab all-time highs on Friday after the company’s comparable store sales and earnings beat Street expectations.
In Wingstop’s second quarter report, the company announced
earnings of $0.23/share on revenue growth of 17.3% to $37.04 mln. What’s more,
the company’s system-wide domestic same store sales growth of 4.3% was enough
to impress investors.
Breaking down the impressive results, Wingstop’s royalty revenues, franchise fees, and other increased $1.9 mln to $17.2 mln from $15.3 mln in the fiscal second quarter last year. Royalty revenue was up $1.8 mln, due mostly to 127 net franchise restaurant openings since July 1, 2017.
Advertising fees and related income increased $0.9 mln to $8.4 mln from $7.5 mln in the fiscal second quarter last year. Advertising fees increased mostly due to the increase in system-wide sales in the thirteen weeks ended June 30, 2018, compared to the prior year fiscal second quarter.
Additionally, company-owned restaurant sales increased $2.6 mln to $11.5 mln from $8.8 mln in the fiscal second quarter last year. The increase was largely due to the acquisition of five franchised restaurants since the prior year comparable period resulting in additional sales of $2.3 mln in the current fiscal second quarter. The remaining increase is due to company-owned domestic same store sales growth of 3.5%, which was driven by an increase in average transaction size.
In terms of guidance, Wingstop confirmed its long-term guidance of low single digit domestic same store sales growth and 10%+ system-wide unit growth. For the fiscal year ending December 29, 2018, the company also reiterates previous guidance, which is consistent with its long-term targets, with the exception of updating certain items impacting fully diluted Adjusted earnings per share; namely:
- The company now sees depreciation and amortization of about $4.5 mln, reflecting the impact of amortization of reacquired franchise rights associated with restaurant acquisitions
- An on-going effective tax rate of around 25% (previously 23%), excluding the impact of excess tax benefits from stock option exercises
- Stock-based compensation expense of about $3.7 mln (previously $3.0 mln)
Additionally, Wingstop expects unit development growth will
be between 12.0 - 12.5%. Management also modestly raised its fiscal year
adjusted earnings guidance to $0.80 from “approximately $0.75.” The company’s
2018 guidance update includes a benefit of $0.05 to Adjusted earnings per share
due to excess tax benefits realized in the first two quarters of 2018.
Management also noted that as of June 30, 2018, there were 1,188 Wingstop restaurants system-wide. During the fiscal second quarter 2018, there were 31 net system-wide Wingstop restaurants opened, including 10 international franchised locations.
Management also announced an increase to WING’s shareholder return; in recognition of WING’s strong cash flow generation, confidence in the business, and commitment to returning value to shareholders, the company’s Board of Directors approved a 29% increase in the quarterly dividend payable to Wingstop shareholders from $0.07 to $0.09 per share of common stock, totaling about $2.6 mln. This dividend will be paid on September 18, 2018 to shareholders of record as of September 4, 2018.
After giving up its 50-day simple moving average (51.87) in late July, shares of WING continued a modestly downward trajectory. The stock bucked up yesterday into the print, though, finishing up 2.5% on Thursday. Shares reclaimed the 50-day this morning, gapping to all-time highs in the process on their way to now boasting gains north of 45% on the year.