Shares of chicken-wing restaurant chain Wingstop (NASDAQ:WING) plunged on Wednesday morning after the company reported full-year 2020 results. It's not that 2020 was bad; in fact, it was a stellar year for the company. But it appears investors weren't thrilled with management's outlook for the coming year. As a result, Wingstop stock was down 12% as of 10:15 a.m. EST today.
For 2020, Wingstop generated revenue of $248.8 million, up almost 25% year over year. It was able to grow revenue by opening new locations and squeezing more sales out of existing ones. It opened 153 net new locations, an increase of 11% from its store count at the end of 2019. And domestic same-store sales were up an outstanding 21.4% from 2019, as diners increasingly turned to delivery last year because of the pandemic and the fact that chicken wings travel well.
Despite its robust growth, Wingstop failed to live up to heightened expectations. For the fourth quarter, Wall Street expected revenue of $64.1 million and earnings per share according to generally accepted accounting principles (GAAP) of $0.24. The company fell short of both of these, with quarterly revenue of $63.3 million and a quarterly GAAP loss per share of $0.21.
There are two major components to Wingstop's growth-stock thesis: unit expansion (opening new locations) and comps growth. The company is expecting a slowdown in both areas in 2021, which is likely the main reason the stock is down today. For 2021 and beyond, management is calling for annual unit growth of around 10%, and annual comps growth in the mid single digits.
Investors don't like decelerating growth. That said, Wingstop hopes to operate over 6,000 locations someday, and it only has a little more than 1,500 today. Therefore, the company can still grow for quite a long time even if it's at a slower pace than in 2020.