Wingstop's 2025 Growth Masks Persistent Same-Store Sales Weakness

What happened

Wingstop reported fiscal 2025 results with a record 493 net new openings and 12.1% system-wide sales growth, highlighting aggressive expansion. This comes after a year of negative domestic same-store sales, which the DeepValue report flagged as a critical risk to the premium valuation. The 19.2% unit growth slightly exceeded prior guidance, but same-store sales declined, reinforcing concerns about macro-sensitive demand from low-income consumers. Management introduced 2026 guidance in the press release, emphasizing operational excellence while glossing over the ongoing comp weakness detailed in SEC filings. The DeepValue report warns that without a rebound in comps, the high growth narrative could unravel, pressuring the stock's elevated multiples of 44x P/E and 46x EV/EBITDA.

Implication

The strong unit growth supports near-term royalty revenue but does not alleviate underlying demand issues, keeping franchisee health and royalty growth at risk. At current high multiples, the stock has little margin for error, and any disappointment in comp recovery could trigger significant multiple compression toward the report's bear case of $200. The DeepValue report's base case assumes comps improve to flat by late 2026, but 2025 results show no early signs of this, increasing scrutiny on 2026 guidance and Smart Kitchen initiatives. High leverage at 5.05x net debt/EBITDA and negative equity amplify downside if unit growth slows or costs rise, limiting financial flexibility. Investors should monitor quarterly comp trends and unit growth guidance closely, as even minor misses could justify the report's potential sell rating and trim above $310.

Thesis delta

The 2025 results confirm Wingstop's ability to execute on unit growth, exceeding net opening targets and supporting the base case's growth assumptions. However, persistent negative same-store sales reinforce the report's caution on comp recovery, aligning with the bear scenario's risks and not materially shifting the investment thesis. This underscores the need for comp improvement to sustain the premium valuation, maintaining the potential sell rating with a re-assessment window of 6-12 months.