Buffalo Wild Wings Shares Slammed After Earnings; I'm Buying More

As I write this, shares of one of my top holdings, Buffalo Wild Wings (BWLD), is being knocked down by 20% due to an earnings miss after Monday night's market close. I have owned shares of Buffalo Wild Wings for over a year and have bought once again to lower my average cost.

The earnings came in Monday night around 5pm at 25 cents per share vs. a consensus of 31 cents per share (see conference call transcript). The company earned $4.6 million, up from $4.3 million in the same period last year. Revenue was up 29% versus last year. Same store sales in company owned stores were up almost 7%. Same store sales in franchised stores were up over 2%.

Buffalo Wild Wings opened 12 company owned restaurants and 12 franchised stores in this quarter. The company also completed the acquisition of nine franchised stores in Las Vegas.

The company said growth for the year should be in the 20-25% range rather than the 25% range that had been expected. The company also no longer has chicken prices locked in so it buys them on the open spot market.

Buffalo Wild Wings is one of the few restaurants posting positive same store sales during this cutback on spending economy. If you visit a Buffalo Wild Wings restaurant, it is generally busy during any given sporting event with people playing poker or trivia games while enjoying wings and beer. The company offers specials on boneless wings two nights a week. Buffalo Wild Wings also has specials on regular wings one night a week. The company offers kids night one night a week as well.

The company has done well to weather this economic downturn. I fully expect shares to recover from this slaughter. I went ahead and reloaded by buying shares on yesterday's dip, once again lowering my average cost paid per share.

I rate the shares a Buy and have a price target of $35 by 11/01/09.

Price Now: $24.03
Target Price: $35.00

Disclosure: Author holds a long position in BWLD

Comments

[captainccs:]

The company should be renamed Buffalo Wild sWings. The sWings make it a great trading stock. :)

2008 Oct 29 08:51 AM

[sumosama:]

isn't the company buying out franchisees a bad sign???

2008 Oct 29 12:31 PM

[punksgt:]

hmmm... clearly an academic analysis.

2008 Oct 30 01:00 AM

[captainccs:]

sumosama asks:

>>>isn't the company buying out franchisees a bad sign???

Not necessarily. It depends on what business you want to be in, restaurants or franchising. The first is more capital intensive but it is a much bigger business with much higher revenues. If you can convert those revenues into net profit at the same rate as franchising, you are a big winner.

With Buffalo Wild sWings same store sales has grown a lot faster at owned restaurants than at franchises and from the comment I have heard, the service at many of the franchises is somewhat deficient. Your brand name is your most important asset and you have to protect it by all means. You either force the franchisees to improve or you buy them out.

2008 Nov 03 08:21 AM