Editor’s Note: A few months ago, my wife and I spent two weeks touring Italy. We climbed hundreds of stairs to stand on the rooftop of the Duomo in Milan one day, then enjoyed stunning vistas of the Mediterranean Sea while hiking two miles of hilly trails in Cinque Terre a few days later.

That type of activity requires a steady supply of fuel, which we satisfied with sumptuous meals. Most evenings we feasted on pasta, osso buco, and other traditional Italian dishes.

One evening while strolling through the historic area of Florence, I noticed a restaurant advertising buffalo wings and fried cheese sticks. I also noticed that nobody was in there, perhaps suggesting that type of food is a uniquely American custom.

Fast Start for Wingstop

Even if buffalo wings never catch on in Italy, there is plenty of demand for them here in the United States. Last week, restaurant chain Wingstop (NSDQ: WING) jumped more than 25 percent after releasing its fiscal 2025 Q2 results (circled area in the chart below).

Some of those numbers were impressive, including a nearly 14 percent increase in year-over-year system-wide sales. However, that figure is misleading since domestic same store sales decreased by nearly 2 percent.

The reason for the big jump in total sales was due to the 129 new stores that Wingstop opened during the second quarter. Without those sales added to the mix, Wall Street may have had a very different reaction to those numbers.

I’m surprised Wall Street reacted as positively as it did to that news. True, the company did exceed its guidance for adjusted earnings per diluted share. However, its net income per diluted share fell by 2.6 percent at the same time.

The same dichotomy holds true for the guidance provided by Wingstop for this year. While the company plans to increase the number of stores by about 17 percent in 2025, it expects its domestic same store sales to grow by just 1 percent.

Presumably, Wall Street believes that Wingstop will be able to improve its same store sales once it slows down the rate at which it is opening new locations. That is why the stock is currently valued at nearly 50 times trailing earnings compared to a multiple of roughly half that for the S&P 500 Index.

Chipotle Déjà vu?

Wingstop’s high valuation based primarily on new store openings reminds me of the story I wrote about Chipotle (NYSE: CMG) two weeks ago (“Chipotle: Food with Integrity Comes at a Cost”). Three months ago, Chipotle also reported an increase in total first quarter revenue despite a drop in its same store sales.

At the same time, the company guided for more of the same over the remainder of this year. I was unimpressed with the company’s lack of a clear plan to improve its same store operating metrics, which I felt would undermine the company’s second quarter results.

That expectation proved true in spades. Less than a week after releasing its Q2 results on July 23, CMG fell from $53 to $44. That put its share price back to where it was at the start of 2024, wiping out seventeen months’ worth of gains.

I have a bad feeling that something similar may happen to Wingstop when it releases its Q3 results in three months. Unless it can find a way to improve the results at its existing stores, opening new stores will only burden the company with more debt and higher operating costs with little benefit in exchange.

That may be why Wingstop is counting on its expansion into international markets for future growth. The company is planning to open 75 stores in France over the next decade. Who knows, Italy might be next!