After a year of soaring chicken prices, Wingstop on Wednesday said it is finally starting to see “meaningful deflation in wings.”
Last year, wings were going for $3.22 a pound on the spot market, now the chain is paying $1.64 per pound, Wingstop CEO and President Michael Skipworth told analysts during a call to discuss the wing chain’s first quarter earnings, his first since assuming the role two months ago.
“We anticipate significant deflation in our core commodity, bone-in wings,” Skipworth said. “This significant deflation in wing prices has bolstered restaurant-level cash flows.”
For the first quarter, Wingstop reported a 14.2% increase in wing prices year over year, which contributed to an increase in the chain’s cost of sales for the period. Cost of sales increased 81.9% to $15.7 million from 75.6% ($13.3 million) the year before, a jump primarily attributed to increases in wages at company-owned stores coupled with rising hiring and training costs due to the pandemic.
Wingstop also said it had finally reopened its dining rooms at the end of March, the majority of which had been shuttered since the outset of the pandemic.
Pre-pandemic, dine-in made up about 20% of Wingstop’s sales, the company said. The average dine-in ticket, though, is about $4 to $5 smaller than an off-premise one. But Skipworth said there is pent-up demand for on-premise dining and that the visits are incremental and don’t require any extra staffing.
“We know that’s an opportunity for us to capture there,” he said. “There is an opportunity out there for us to capture some dine-in occasions. It made a lot of sense to open up our dining rooms.”
Wingstop, which ended the quarter with 1,588 U.S. locations, said it has opened 60 net new restaurants during the first quarter, a 13.4% increase over a year ago. The Dallas-based company raised its net new unit forecast for 2022 to more than 220 locations.
Wingstop has been steadily growing its international business, too, ending the period with 203 global units. The brand has seen success with its U.K. units and is slated to open in Canada during the second quarter. Wingstop recently expanded its partnership with its franchisee in Indonesia.
“As more of these markets come online, we will see that part of the growth story play a bigger role,” Skipworth said.
Skipworth took over as Wingstop’s CEO in March after the unexpected departure of Charlie Morrison, who left the chain after a decade to helm a 50-unit drive-thru salad concept, Salad and Go.
Wingstop raised prices about 5% in the first quarter, compared to the year before. With chicken prices falling, Skipworth said the limited-service wing chain is looking at ways to pass some savings along to diners.
“We do have the opportunity to lean into that and give some of that back to consumers in the form of value,” he said.
For the quarter ended March 26, Wingstop reported its systemwide sales increased 12.7%, to $630 million. Same-store sales increased 1.2% and restaurant average unit volumes increased to $1.6 million.
Total revenue for the quarter grew 7.8%, to $76.2 million.
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