What happened
Shares of Wingstop (WING -2.53%) climbed sharply higher this week, surging as much as 22.6%, according to data provided by S&P Global Market Intelligence. As of the market close on Friday, the stock was still up 20.5%.
The fast-casual chicken-wing restaurant had a couple of distinct catalysts that could have propelled the stock price higher.
So what
The biggest and most likely contributor to this-week's boom was the recent announcement that Wingstop is offering a new chicken sandwich in "12 bold flavors." The news dropped in late August, but interest was reignited when CEO Michael Skipworth appeared on Yahoo! Finance Live. Wingstop is offering a unique take on the lunch staple by taking a naked chicken patty and dipping it in one of the company's 12 signature sauces.
In fact, the new menu item was so successful, it sold out. The company went through a four-week supply -- more than 1 million chicken sandwiches -- in a matter of days. The Friday following the chicken-sandwich launch was one of Wingstop's highest transaction days on record, even surpassing Super Bowl Sunday, according to industry publication QSR.
Another potential catalyst was a proposed referendum by restaurant owners in California, who are seeking to block the state's FAST Recovery Act. Among other things, the new law could set a minimum wage for fast-food workers in California as high as $22 per hour beginning next year. This is a massive increase, compared to its current rate of $15 per hour.
The proposed referendum would block the new law, giving California voters the opportunity to weigh in. The move has the backing of two industry groups -- the International Franchise Association and the National Restaurant Association. If the referendum passes, it would suspend the new law until the measure goes before voters in November 2024. Delaying what would be a costly new law will directly benefit Wingstop.
Now what
The wildly successful new menu item was enough to ignite a fire under Wingstop stock, though the potential delay of an onerous new law likely didn't hurt. This continues a trend of good news for Wingstop investors.
In the second quarter, the company reiterated its guidance for low-single-digit same-store sales growth and robust profits -- all of which happened well before the record-breaking sales of its new chicken sandwich. This bodes well for Wingstop's future results.
