Buffalo Wild Wings' Strong Revenue, Growth Story Intact

| About: Buffalo Wild (BWLD)

Buffalo Wild Wings (NASDAQ:BWLD) reported decent second-quarter results Tuesday that showed impressive top-line expansion but some cost pressures due to its store-expansion plans. We continue to believe in the long-term growth story of “B-Dubs” and would add to our position in our Best Ideas portfolio on any significant weakness in the shares as a result of the report. Our fair value estimate for Buffalo Wild Wings is $75 per share, and we make available our DCF valuation model template here.

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Source: Valuentum Securities Inc.

Buffalo Wild Wings' total revenue for the second quarter increased over 26% on the heels of a 5.9% same-store sales increase in company-owned restaurants and a 2.7% jump at franchised restaurants; the firm operated 43 additional company-owned restaurants versus the same period a year ago. Average weekly sales for company-owned restaurants were up nearly 12% in the period, while the measure advanced 4% for franchised locations – both solid increases. The firm’s bottom-line expanded about 16%, a little lighter than what we were expecting but still a very strong performance. The company opened 18 new locations across the US and its first international location in Toronto during the quarter, which indicates strong unit-growth momentum. Management expects to open 29 new company-owned restaurants in the US and three in Canada during the second half of 2011; it expects franchisees to open about 37 locations. We continue to believe that management’s expectation for the long-term restaurant potential of its chain is conservative.

The firm noted that same-store sales for company-owned and franchised restaurants are increasing at a pace of about 5% and 3%, respectively, so far through the third quarter. Buffalo Wild Wings noted that it should also achieve its net earnings growth goal of 20% for the year, as a result of this continued same-store sales momentum and the NFL season intact. We continue to like the shares.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.