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Skeptics have been shorting Wingstop stock - here's why the CEO says they simply 'don't have a clear understanding' of the company

Business Insider | Jan 12, 2018, 03.09AM IST

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  • Wingstop's CEO Charlie Morrison described 2017 as "one of the most difficult - if not the most difficult - year we've faced at Wingstop in our 23-year history."
  • Skeptics have been shorting the company's stock over the last two years, with Kase Capital founder Whitney Tilson saying there's "little that is proprietary or unique about this business."
  • Morrison says that skeptics shorting the stock "don't have a clear understanding" of the company.

After the company's most challenging year ever, Wingstop's CEO is firing back at traders shorting the chicken chain's stock.

"If I'm a skeptic, I probably just don't have a clear understanding about what we're about, and probably need to gain a better one," CEO Charlie Morrison told Business Insider.

Morrison described 2017 as "one of the most difficult - if not the most difficult - year we've faced at Wingstop in our 23-year history" in a presentation at the ICR Conference in Orlando, Florida.

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Melia Robinson/Tech Insider

Wing prices reached record highs over the past year, a major complication for a chain focused almost solely on wings. Additionally, Morrison said the chain's core customer base of lower-middle income Americans (over-indexing with African-American and Hispanic customers) were spending less in early 2017, following the election.

Wingstop has became a target for traders betting against the company over the last two years. One high-profile detractor, Kase Capital founder Whitney Tilson, called the company's valuation "absurd" in a presentation in April. Tilson noted that same-store sales growth is decelerating, and stated that there's "little that is proprietary or unique about this business."

According to Morrison, the simplicity that Tilson seems to consider a negative is crucial to the brand's success.

"If you look back at our 23-, 24-year history, our innovation has consisted of three new flavors and a couple new proteins on the menu," Morrison said. "Our big innovation and the things we will change are technologically related - and those are things that will make it simpler, not harder."

Morrison seems to be proving the skeptics wrong. The chain finished 2017 with its 14th consecutive year of same-store sales growth.

Investors seem to have come around somewhat on Wingstop, at least according to a measure of bearish bets on the stock. Since hitting a record high at the end of September, short interest - a gauge of wagers that a stock will drop - has fallen by more than $4 million, or 39%, according to data compiled by financial analytics firm S3 Partners. It's now at the lowest level since March.

Looking to 2018, Morrison says that the chain is banking on digital ordering and delivery for continued growth. After testing delivery with DoorDash, Wingstop is rolling out delivery starting in late 2018 to 2019 on a market-by-market basis.

"We believe we exist in a category all by ourselves," Morrison said.

He continued: "I think we've set up a great model that's hard to replicate. We're going to continue to steal share throughout the industry as we grow."

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