Wingstop Inc. is banking on a digital strategy to grow its lucrative online sales, executives said Thursday.
The Dallas-based fast-casual wing chain saw online orders increase to 16.9 percent of domestic sales in the second quarter ended June 25, from 15.8 percent in the first quarter, said Charlie Morrison, Wingstop president and CEO, in an earnings call with analysts.
Online sales growth was supported by a new integrated point-of-sale system that is rolling out to the Wingstop system, Morrison said.
“In the second quarter this year, 27 percent of our domestic restaurants had online sales mix in excess of 20 percent of total sales,” he said. “This is up from 20 percent in Q1.
“The progress we have made, along with the fact that 75 percent of our sales is takeout, gives us confidence that we can continue to grow our online ordering mix much higher over time,” Morrison said.
Morrison reiterated the company’s outlook for online sales that could move toward the more than 50 percent of sales seen at pizza chains. Additionally, Wingstop’s online orders generate an average check that is $4 higher than traditional orders, he said.
“If you look at Wingstop, 60 percent of our orders today still come in over the phone,” Morrison said. A handful of Wingstop units are seeing 30 percent of sales in online orders, so he said sales expansion for the brand is “certainly possible and doable long-term.”
“One of the key enablers of online ordering growth is the rollout of our new POS system that integrates online orders straight to the kitchen,” he said. “As of the end of the second quarter, we have reached 73-percent implementation with our new point-of-sale system, and should be about 90-percent implemented by year end.”
To expand the reach of online ordering, Wingstop partnered in June with Dallas-based Conversable to make it easier for social media users to place orders through Twitter and Facebook Messenger.
“This is just the next step in what we believe will be future opportunities to expand on the traditional digital channels for ordering,” Morrison said.
Also Thursday, Wingstop announced an agreement to franchise the brand in Saudi Arabia. The deal gives Atheela Al Arabia exclusive rights for the Kingdom, expanding Wingstop’s Middle East footprint beyond its existing foothold in the United Arab Emirates. The first unit is planned for Riyadh in 2017.
Atheela Al Arabia is a new company funded and headed by Fahad Bin-Hithleen and Fahad Al Muqbil. Bin-Hithleen is chairman of the Fahad Bin-Hithleen Group, which franchises Crêpe Café in the Kingdom.
“We're being very diligent and careful about our pace of international expansion for a lot of reasons,” Morrison said. “Certainly supply chain is a big piece to the puzzle of establishing a long-term successful international strategy.”
International markets require attention to such issues as having products that are free of genetically modified ingredients, and others that are certified to halal standards.
Wingstop reported a 12.1-percent increase in cost of sales in the second quarter at company-owned restaurants, which Mike Mravle, chief financial officer, said was fueled by a 7.8-percent increase in bone-in chicken wing prices.
In June and July, Wingstop ran a special promotion called the $20 Summer Boneless Bundle, with 20 boneless wings, two orders of fries, two dips and two drinks.
Morrison said the promotion was intended less to meet competitor discounting than to offset the cost of bone-in wings.
“Certain of our franchisees and some of our markets have been testing an offer like this previously,” he said.
“We think it creates a great value, but at the same time from the check perspective it's a $20 deal,” he said. “And so with our high check average this particular promotion worked quite well.” The primary benefit was that it helped drive up the boneless wing sales mix.
Wingstop said Thursday that second-quarter net income increased to $4.1 million, or 14 cents a share, from $584,000, or 2 cents a share, in the same quarter last year. Revenue increased 18.2 percent, to $22.7 million, from $19.2 million in the prior-year period. Domestic same-store sales grew 3.1 percent.
As of June 25, Wingstop franchised 831 restaurants and owned and operated 20 units. The company has 63 franchised restaurants in five other countries.