Wingstop lays out its plan for dealing with wild swings in chicken wing prices
- Wingstop suffered from high food costs last year due to skyrocketing wing prices.
- Chicken wing prices moderated at the beginning of 2018.
- The company revealed during its first-quarter earnings call how it plans to deal with chicken wing price swings.
- Watch Wingstop trade in real-time here.
Wingstop reported first-quarter earnings Thursday and gave investors a taste of how the company will deal with swinging chicken wing costs in its earnings call after the restaurant struggled with high chicken wing prices last year.
The restaurant's menu primarily features wings though it also offers a few side items, meaning fluctuations in wing prices can weigh heavily on business. In 2017, business costs soared due to a 40% increase in jumbo wing prices. The fiscal third-quarter of 2017 saw a record jumbo wing closing price of $2.09 a pound.
The high costs, combined with conservative spending by its main customer base, lower-middle income Americans, led to Wingstop CEO Charles Morrison calling 2017 "one of the most difficult-if not the most difficult-year we've faced at Wingstop in our 23-year history."
But Wingstop has some tricks up its sleeve. The company revealed during its quarterly earnings call Thursday that it can combat fluctuating food costs by encouraging customers to buy boneless wings when bone-in-wing costs spike. The company saw some success with reducing the price of boneless wings for customers while increasing bone-in-wing prices.
The restaurant also tried offering new items like promoting a $19.99 boneless-wing pack which included 25 boneless wings, fries, and a drink. The pack is not a regular menu product of the restaurant. Wingstop said it went off menu to build a value-oriented product that can feed two to three people.
"That's been a very effective way for us to do price point advertising, but not discount," Morrison said in the earnings call. "And so I think the differentiation here is great value to pricing not discounting."
The first-quarter benefitted from more favorable wing prices compared to last year, and management noted that the cost of sales decreased due to the 11% deflation in wing prices versus a year ago. Looking forward to the rest of 2018, Wingstop anticipates favorable wing-price trends to continue.
"Every few years we see the cyclicality in the wing prices," Morrison said in the earnings call. "When it goes high, it's tough, but when it goes low, it's a great opportunity for us. We expect these wing prices to moderate and perhaps sustain for quite a period of time."
Wingstop shares are up more than 39% this year.
