Buffalo Wild Wings: Buying Opportunity at Hand

| About: Buffalo Wild (BWLD)

Buffalo Wild Wings reported 2Q 2007 results on 7/31/07. I opened a position in the company yesterday at the price of $35.58 per share.

** Sales up 22.1% to $76 million from $62.3 million in 2Q 2006
** SSS up 8.1% at company-owned restaurants and 4% at franchise-operated restaurants
** Cost and expenses up to $70.97 million from $59.05 million in 2Q 2006
** Franchise royalties and fees up 17.2% to $8.5 million from $7.2 million in 2Q 2006
** Average weekly sales for company-owned restaurants up 8.9% to $36,655 from $33,600 in 2Q 2006; average for franchise-operated restaurants up 3.9% to $43,998 from $42,338

** Net income up 57% to $3.84 million ($0.22 per share) from $2.43 million ($0.14 per share) in 2Q 2006
** Profit margin 5.1% from 3.9% in 2Q 2006
** Diluted share count 17,743,876

** Cash flow from operating activities $17.64 million from $15.6 million in 2Q 2006
** Cash flow from investing activities -$23.19 million from -$13.03 million in 2Q 2006
** Cash flow from financing activities $397K from -$16K in 2Q 2006

** $71.11 in cash and marketable securities
** Long-term debt $0

** Opened 5 company-owned restaurants
** Opened 2 franchise-operated restaurants
** Operating total of 446 restaurants

[Press Release]

Considering this has often been the poorest quarter of the year for the company, these are terrific results. Analysts are upset because the company missed analyst sales projections, but that's their problem, not the company's. The company continues to show strong earnings and sales growth, management reiterated their 2007 "growth goals", and the business continues to produce strong cash flow. Analysts will be analysts, there's no escaping it. But I think we have a great opportunity at hand here, which is pretty obvious since I purchased some shares just yesterday.

What I especially like to see is the improved margins. Even in a quarter that has proved to be a not-as-good one historically for the company, management was able to raise the profit margin a good amount and keep costs under control. No costs were wildly out of control, so I'm pleased with the quarter and see no reason for the stock to have been hammered 17%+. What I really like about this business is the focused management. When you have focused and dedicated management like Buffalo Wild Wings, the long-term growth of the business will simply be a lot more smooth and probably a lot stronger as well.

Anyway, nothing has changed for the worse with the business; growth is strong, price increases have kept cost impact down, and margins are showing strong growth as well. The business is still in great shape and I think the long-term looks as good as it ever has. Management remains focused and is excited about the upcoming football season and the positive impact it will have on the business and operational results.

For the 3Q 2007, analysts are expecting an EPS of $0.26 on sales of $81.6 million.

Disclosure: Author is long BWLD