Best idea Buffalo Wild Wings (NASDAQ:BWLD) reported strong first-quarter results Tuesday that support our view that the firm's expansion efforts are still in the early innings. Though we liked the firm's quarter, Buffalo Wild Wings is getting a bit pricey at these levels and we may look to scale back our position even further in the portfolio of our Best Ideas Newsletter on continued strength. Our fair value estimate for the bar-and-restaurant chain remains unchanged.
The firm's first-quarter revenue advanced an impressive 37.9%, as sales from company-owned restaurants jumped more than 40% from the same period a year ago. Same-store-sales increased 9.2% at company-owned restaurants and 7.3% at franchised restaurants, indicating that the Buffalo-Wild-Wings concept continues to resonate with consumers. The company did a nice job mitigating the rise in wing costs during the quarter, and while earnings expanded less than the pace of sales, they still increased over 22%, with diluted earnings per share coming in at $0.98 in the quarter. During the period, Buffalo Wild Wings added 64 new company-owned restaurants and 17 new franchise locations relative to the same period in 2011. We think unit restaurant growth potential is still robust, and our view is that management's saturation estimates are conservative - 1,500 locations in North American in the next five to seven years. We were also encouraged with management's commentary regarding the pursuit of international franchising opportunities and potential new concepts that would offer incremental expansion.
Looking ahead, management indicated that same-store-sales are advancing at roughly a 7% pace during the first four weeks of the second quarter. Though this is slightly lower than the rate achieved during the first quarter, it still is quite robust. Further, we think Buffalo Wild Wings will have no trouble achieving its net earnings growth of 20% for 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: BWLD is included in the portfolio of our Best Ideas Newsletter.