The pandemic has hit restaurants particularly hard, but Wingstop was able to offer some good news early Wednesday.
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The shares rose nearly 5% after the chain reported upbeat fiscal second-quarter earnings, which showed an increase in sales -- a rarity in the sector in 2020 and a testament to management's digital strategy.
Wingstop said it earned 39 cents a share, more than double the figure in the year-ago period, on revenue that rose 36% year over year, to $66.1 million. Analysts were looking for EPS of 29 cents and revenue of $62.46 million.
Systemwide sales climbed 37% to $509 million, while domestic same-store sales jumped 31.9%, easily ahead of the 22.9% consensus estimate. Lower chicken sales helped reduce the cost of sales to 73.1% from 76.1% at company-owned restaurants.
The company said it opened 23 new restaurants during the quarter, and it expects to open between 120 and 130 locations for the full year.
Wingstop was up 4.9% to $139.85 in early trading, and it isn't hard to see why investors are so enthusiastic. Wingstop saw sales climb at a time when most of its peers are dealing with steep declines. Late Tuesday, Starbucks (SBUX) estimated that it lost more than $3 billion in sales due to the pandemic.
A long-term focus on delivery and online ordering is a big reason why Wingstop was able to sidestep some of its rivals' pain: Even before the outbreak, digital sales made up about 40% of its revenue, a figure that rose to 47% at the end of the first quarter. Management previously said that they improved to about 65% in April, helped by the pandemic and a temporary free-delivery promotion with DoorDash.
That strong digital showing is down to the chain's younger clientele, who have long been comfortable ordering online, as well as investments that Wingstop made last year in beefing up its digital and delivery channels. The company has previously said its goal is "to digitize 100% of transactions."
Gordon Haskett analyst Jeff Farmer noted that it's especially impressive "that momentum never slowed" in the second quarter, which was so difficult for the restaurant sector. Wingstop "continues to distinguish itself as the lone restaurant company (arguably brick-and-mortar retail company) that can deliver double-digit % unit growth and mid-single digit SSS growth over the next 3+ years," he wrote.