Wingstop CEO talks earnings, inflation, and NFL ad spend
Wingstop CEO & President Michael Skipworth joins Yahoo Finance Live to discuss earnings, not having to raise prices, increasing advertising investments, and menu innovation.
Video Transcript
[AUDIO LOGO]
BRIAN SOZZI: Wingstop is coming off a better-than-expected quarter for sales as diners embrace the company's new chicken sandwich. It also helps from a profit perspective that chicken wing prices have started to-- or they have flown lower. Let's check in with Wingstop CEO Michael Skipworth.
Mike, good to see you, as always. Last time we talked to you, you guys were really one of the first restaurants to call out deflation. Are you still seeing those deflationary prices? And how long do you think it will last?
MICHAEL SKIPWORTH: Brian, we are. We're enjoying meaningful deflation in our business today, just as we were back when we spoke a quarter ago. And as we look at some of these leading indicators around our overall supply chain, it seems to suggest a backdrop of continued favorability from a commodity perspective for the balance of 2022 and into the beginning of 2023.
BRAD SMITH: A lot of new menu items that you've rolled out over the course of this year, Michael. How do you continue to kind of look through some of the performance indicators and in different markets as you kind of continue to look through the menu and what consumers, even regardless of pricing, what they're gravitating towards right now?
MICHAEL SKIPWORTH: Yeah, Wingstop's in a really unique spot in that in the second quarter, our business was hit with a perfect storm. And we were able to lean into a proven value playbook, as well as pull some unique growth levers that we have as a brand. And one of those being leaning into menu innovation and introducing chicken sandwich to consumers out there.
First time we've done that as a brand. And we think that's a meaningful long-term sustaining sales driver for our business. And just launching that, along with some of the other levers we pulled, translated to a 6.9% same-store sales growth in the third quarter. And what's really great about that growth is the majority of that came with transaction growth.
JULIE HYMAN: I think we've talked to you about this last time, Michael, with the prices, the raw material prices coming down for you guys. I don't imagine you're cutting prices for consumers. But I imagine maybe you're keeping them steady. How long do you-- I mean, for the foreseeable future, do you think you'll see some stability there?
MICHAEL SKIPWORTH: We've talked about the unique spot we're in this year where we haven't had to take any price, where the rest of the industry, to manage their margins, has had to take meaningful price this year. And you're seeing that start to impact some of the transactions in their business. And we've been able to lean into that value playbook and not necessarily take any price this year and present consumers with meaningful value so that they can enjoy that indulgent Wingstop occasion.
BRIAN SOZZI: Michael, my team here doesn't think I watch football, but I, in fact, do. And I was watching football, and I've seen you guys start to pop up on TV. Are you getting return on that investment in the NFL? And what does it look like?
MICHAEL SKIPWORTH: We are, Brian. We're seeing a meaningful increase in our investment in advertising this year. The back half of this year, we're increasing our investment over 35%. And you're seeing us, as you mentioned, show up in a big way in NFL, as well as the NBA that's just kicked off in live sports. And that's helping us close the gap that we have in brand awareness to other national brands that are out there. And, again, another one of those multiple sales-driving levers that we have that give us confidence in our ability to deliver our 19th consecutive year of same-store sales growth this year.
BRAD SMITH: Are people coming in store? Are they ordering through digital app? What is that touchpoint, especially when you think about that customer acquisition cost and the awareness generation that you're ramping up right now?
MICHAEL SKIPWORTH: Yeah, Wingstop's been an industry leader from an investment in digital, and we had a really strong digital business before the pandemic hit. And then, obviously, we saw explosive growth during the pandemic in our digital business, already a business that was heavy off premise. Over the last three years through the third quarter, we've seen ourselves grow north of 36%.
And that digital business that I referenced is over 60% of our business today. And that's a stickiness that we've been able to really hold since consumers have started to normalize their behavior a little bit to pre-pandemic behaviors. But those digital customers that we've brought into our brand, we've been able to hold on to them and continue to build from there.
