Wingstop Inc. soared to a record high after it reported fourth-quarter same-store sales growth that topped Wall Street’s expectations amid optimism that its new chicken sandwich line could boost its revenue.
(Bloomberg) — Wingstop Inc. soared to a record high after it reported fourth-quarter same-store sales growth that topped Wall Street’s expectations amid optimism that its new chicken sandwich line could boost its revenue.
The chicken-wing chain rallied as much as 17% to the highest level ever after reporting quarterly domestic comparable-sales growth of 8.7%, exceeding the average analyst estimate of 6.1%. Its adjusted earnings per share also came in higher than anticipated as it benefited from a sharp decrease in the cost of bone-in chicken wings compared to the same period a year ago. The jump in its shares added more than $400 million in market value.
The stock has climbed 32% so far this year, as small-cap and mid-cap restaurant operators have had a strong start to the year after underperforming their larger peers in 2022. The S&P 600 Restaurants Index has surged 26% this year, while the mid-cap gauge, which includes Wingstop, has advanced 15%.
Citigroup Inc. analyst Jon Tower expects part of Wednesday’s gain to be driven by a short squeeze, given Wingstop short interest is about 12% of float, according to data from analytics firm S3 Partners.
Read more: Wingstop Rallies to Record as Sales Trends Impress: Street Wrap
Recent initiatives to drive sales growth, including the new chicken sandwich line, expanding third-party delivery partnerships and increased advertising, seem to be resonating with consumers and in turn boosting profits, according to Tower.
Earnings results have also historically been a boon for Wingstop shares. The stock has gained in the session after results for the past four quarters, according to data compiled by Bloomberg.
Known for launching limited-edition flavors including a cannabis-inspired blend, Carolina Gold barbecue and most recently reviving its sold-out hot honey rub, the restaurant chain is banking on its new chicken sandwich to improve earnings performance while it diversifies its sales mix of bone-in and boneless wings.
“We remain extremely excited about the long-term opportunity the chicken sandwich provides,” Chief Executive Officer Michael Skipworth said on the earnings call.
–With assistance from Crystal Chui.
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