Wingstop shares fall as profit miss overshadows sales beat

Wingstop shares fell 12% in early Wednesday trading after the restaurant chain reported quarterly profit per share below Wall Street’s estimate, according to MarketWatch. For retail investors, the move shows how a fast-growing company can still face pressure when earnings do not clear expectations.

Dallas-based Wingstop said net income was $25.7 million, or 88 cents a share, for the quarter. That compared with $19.5 million, or 65 cents a share, in the same period a year earlier.

Analysts tracked by FactSet had expected earnings per share of 96 cents. Earnings per share, or EPS, is a company’s profit divided by its share count. Revenue came in at $162.5 million, up from $117.1 million a year earlier and above the FactSet consensus of $160.0 million.

Sales growth stayed strong

The stronger part of the report came from Wingstop’s existing U.S. restaurants. The company said same-restaurant sales in the U.S. rose 20.9%. That metric measures sales at comparable restaurants, helping investors separate demand at established locations from growth created by opening new ones. FactSet had expected same-restaurant sales growth of 11.4%.

Chief Executive Michael Skipworth said sales were driven by transaction growth, according to the company. Transactions are customer purchases, so the comment points to order activity as a key contributor during the quarter.

Wingstop also expanded its restaurant base. The company opened 106 net new units during the period, which it described as a record. System-wide restaurant count grew 17.1% from a year earlier, according to Wingstop.

Wingstop lifts its unit-opening target

For the full year, Wingstop kept its outlook for domestic same-store sales growth at about 20%. Same-store sales is another term for comparable restaurant sales. The company also raised its expansion target and now expects to open 320 to 330 net new units this year, up from its previous guidance of 285 to 300.

The market reaction centered on the gap between growth and profitability expectations. Wingstop beat revenue estimates and topped Wall Street’s same-restaurant sales forecast, but its EPS missed the FactSet consensus. Before Wednesday’s drop, Wingstop shares had gained 44% for the year to date, while the S&P 500 was up 22%, according to MarketWatch.

This story draws on original reporting from MarketWatch.