Adding WING to the LONG List
We are adding WING to the LONG list and hosting a Black Book call on July 14th @ 2 PM.
Wingstop, Inc., with an enterprise value of $2.9 Billion, is a franchisor and operator of restaurants, which engages in cooked-to-order, hand-sauced, and tossed chicken wings. It operates primarily through 1,754 Franchise stores, or 97% of the total store base. The Franchise segment consists of both domestic and international franchise restaurants. The company was founded in 1994 and is headquartered in Addison, TX. We like the setup for WING as a strong Quad 4 name for these reasons:
Mining the digital consumer
WING is a company with a robust platform for monetizing data, focused on engaging with the consumer and managing the brand, but digitally tech-enabled in a way that gives the company a 360 view of the consumer. In 1Q22, 62.3% of sales were digital, up 10% YoY.
Wing Deflation
The pandemic drove a significant increase in the number of restaurants selling chicken wings driving down supply and driving up the price of wings. Those dynamics are reversing in 2022, and WING should be able to recapture lost margin thru lower food costs in 2H22 and into 2023. In addition, the company is in a unique spot and can lean into value to drive incremental traffic, while others in the industry are taking more price.
Same-Store Sales and Traffic
WING posted the slowest SSS for 1Q22 at 1.2% in some time and has a challenging comparison in 2Q22 at 31.9%. But the traffic remains strong. While this is a concern for the upcoming quarter, we believe the company has seen accelerated traffic since the end of 1Q22 and that the improvement in profitability will overshadow the difficult comparison.
Just EAT Takeaway & AMZN
We are SHORT DASH
Ahead of Prime Day on July 12-13, Amazon (AMZN) announced that Prime members in the U.S. can enjoy a free, one-year Grubhub+ membership with no food-delivery fees on eligible orders, effective today. In exchange, Amazon (AMZN) will receive warrants representing 2% of Grubhub's shares and an additional 13% of shares conditional on the deal bringing Grubhub enough customers. Prime Members can use this facility in over 4,000 cities with hundreds of thousands of restaurants across the country on orders over $12. "The agreement is expected to expand membership to Grubhub+ while having a neutral impact on Grubhub's 2022 earnings and cash flow, and be earnings and cash flow accretive for Grubhub from 2023 onwards," Just Eat Takeaway said in a statement. The deal is a lifesaver for Just Eat Takeaway, which has been miss managed for years. The membership agreement will renew every year unless Amazon or Grubhub terminates it, and Just Eat will continue to explore a full or partial sale of the U.S. business.
