Buffalo Wild Wings Is Morphing Into A Sports Franchise

| About: Buffalo Wild (BWLD)
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Summary

Buffalo Wild Wings is adding more sports infrastructure and tie-ins to attract and keep customers.

Less expensive gasoline is giving consumers more disposable income, helping BWW and other eateries.

New investments in the budding Rusty Taco and PizzaRev chains are helping domestic expansion.

Buffalo Wild Wings (BWLD) is trying to become more than a casual dining restaurant chain - the ambitious company is pursuing a bold strategy to morph into an iconic sports brand as well.

Whether a restaurant company can literally hitch its wagon to sports sounds like a stretch, but "B-Dubs," as its fans call the company, sees big profits if it can pull the plan off.

Buffalo Wild Wings posted adjusted Q3 EPS of $1.14, up 20 percent from the year-ago period, continuing its long stream of heady growth as the company builds out its stores in North America and begins to pursue global expansion. The company is something of a juggernaut, and occupies the #9 position in the National Restaurant Association's 2014 Top 100 Fastest Growing Companies in the industry.

The fact gas prices have fallen by over one-third from their peak in recent months is a definite boon to consumer discretionary stocks like Buffalo Wild Wings. It should benefit from the extra cash riding in consumers' wallets.

The company is also investing in what it likes to call "emerging brands" in the restaurant space, including the Rusty Taco and PizzaRev chains, both of which it hopes will have national franchise potential.

But it is in sports tie-ins where Buffalo Wild Wings may enjoy its biggest successes. The company has long used the tag-line "Wings. Sports. Beer" in its promotions, including as the company description for its Twitter profile.

Now, Buffalo Wild Wings is putting its money where its mouth is.

Stadia, Sponsorships, Apps And Tablets

The company has plunged into big-time sports promotions with its sponsorship this year of college football's Citrus Bowl (now officially the Buffalo Wild Wings Citrus Bowl), a multi-year obligation for which the eatery chain is bound to get tons of radio, TV, print and social media rub-off.

In addition, Buffalo Wild Wings just launched its own branded radio station on iHeartRadio that is chock-a-block with sports commentary in addition to music, has launched a popular GameBreak app for fantasy games, and is staging a "Million Dollar Pick'Em Challenge" to award $1,000,000 to the customer who picks the winner of all 39 college bowl games.

The eatery also re-imagined its restaurants, and came up with a Stadia concept that incorporates dozens or large TV screen and other fittings to mimic the atmosphere of a sports stadium.

Buffalo is retrofitting its restaurants with the Stadia look, hoping to entice fans on game days with the fact that while tickets to attend live sporting events have become prohibitively expensive for many, fans can enjoy a virtual stadium experience at Buffalo Wild Wings while drinking and eating and still spending less.

Finally, Buffalo Wild Wings is outfitting its restaurants with tablets and digital sports games to hold customers' attentions.

In college football, Buffalo Wild Wings likely is being helped in its Q4 comparisons with 2013 by more games this year - there are 39 bowl games, up from 32 in 2012, plus two new semi-final contests as part of The College Football Playoff - hence, more occasions than last year for sports fans to visit their local Buffalo Wild Wings.

Buffalo Wild Wings opened 90 to 95 new stores in 2014 toward its goal of attaining 1,700 total locations in 2015. One blemish is rising chicken prices and higher labor costs, but the company has raised menu prices by about 3 percent to offset the higher expenses.

Among its fundamentals, Buffalo Wild Wings boasts revenue growth (TTM vs. prior TTM) of 17.9 percent vs. the industry average 5.14 percent, on torrid EPS growth of 38.72 percent.

Its price/sales ratio (TTM) is 2.39 vs. the industry average of 3.06. Margins are a bit weaker than the industry average, but on the plus side the company has no debt to speak of.

Q4 and Q1 are traditionally the strongest quarters of the year for Buffalo Wings, thanks to football. When football season ends in early 2015, the company has cooked up a collaboration with the NCAA just in time for March Madness, when Buffalo Wild Wings will be an authorized hangout for that basketball series.

Looking ahead to 2015, Buffalo Wild Wings is projecting EPS growth of 18 percent, as its sports strategy takes root, new stores open, international expansion unfolds, and new brands like Rusty Taco and PizzaRev begin to blossom.

Conclusion

Buffalo Wild Wings stock recently touched a new all-time high, but more new records appear attainable so long as the company can keep up its growth and expansion mode, fed by a successful sports tie-in strategy.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.