The casual dining chain,
Buffalo Wild Wings Inc.
) recently reported fourth quarter 2012 earnings of 89 cents per
share; ahead of the year-ago quarter's earnings of 73 cents per
share. However, the earnings missed the Zacks Consensus Estimate
of 95 cents. The annual rise in the earnings was led by the
company's strong top-line growth and unit growth, offsetting
higher cost of sales.
Total revenues climbed 37.8% year over year to $303.8 million
and outperformed the Zacks Consensus Estimate of $295 million.
Quarterly revenues were driven by 5.8% and 7.4% same-store sales
growth at the company-operated as well franchised restaurants,
respectively. Revenues also gained from an additional 62
company-owned restaurants compared with the previous year
In full year 2012, the company reported earnings of $57.3
million, or $3.06 per share, versus $50.4 million, or $2.73 per
share in the prior year. Total revenue grew 32.6% to $1.0
Behind the Headlines Number
Sales at the company-operated restaurants surged 39.3% to
$282.7 million, fueled by the new unit openings and higher
Franchise royalties and fees jumped 20.6% year over year to
$21.1 million, thanks to 12 additional restaurants in operation
at the end of the quarter compared with the year-ago quarter, an
improvement in comps. The company accrued $1.5 million franchise
royalties and fees during the fourteenth week of the quarter.
Average weekly sales at the company-operated restaurants
increased 6.9% year over year to $55,595 and at franchised
restaurants climbed up 9.6% to $58,490.
Restaurant's operating margin contracted 150 basis points (bps)
to 17.8%, aided by a 260-bps hike in cost of sales to 32%,
arising from a 46% average surge in traditional wings price and
30-bps hike in labor cost to 30.2% (as a percentage of restaurant
sales). This was partially offset by a 70-bps drop in occupancy
costs to 5.2% and 80-bps fall in operating costs to 14.7%.
During the quarter, Buffalo Wild Wings opened 38 new
company-owned restaurants and shut down one franchised
restaurant. Buffalo Wild Wings currently operates 383
company-owned restaurants and 510 franchised restaurants.
In the first quarter of 2013, the company plans to introduce
14 new company-owned restaurants in North America and transfer
one old unit. The company intends to buy three franchised units
and it also expects that nearly 8-10 franchised units will be
launched in the quarter.
In 2013, the restaurant chain plans to unveil more than 60
company-owned and 45 franchised restaurants, and also expects to
achieve the 1,000 unit milestone by the end of the year.
Buffalo Wild Wings ended the quarter with cash and cash
equivalents of $21.3 million and shareholders' equity of $383.4
Management witnessed comparable sales growth of 2.6% and 1.6% at
the company-operated restaurants and franchised restaurants,
respectively, (comps calculated by adjusting the timing of the
college and NFL football seasons for 2012 and 2013) for the first
six-week period of the first quarter of 2013. However, the comps
growth is far below the prior-year period.
The company is undertaking various initiatives like menu and
technological innovations and restaurant upgradation. The company
with its multi-year agreement with NCAA will focus more on its
marketing and promotion to attract customers. The company is
likely to extend its coverage further and now expects net
earnings growth of 25% in 2013, higher than the prior year growth
We remain encouraged by the company's comps growth at both the
company-owned and franchised restaurants and debt-free balance
sheet. The company's expectation of a 25% net earnings growth in
2013 is quite impressive. Moreover, the company provides ample
growth opportunities, given its plan of opening 1,000 restaurants
in the United States by 2013 and 50 in Canada by 2015.
However, the comps growth for the upcoming quarter has not
started on a positive note. Moreover, we remain cautious on the
stock based on soaring wing prices, lower consumer spending and
Buffalo Wild Wings currently retains a Zacks Rank #3 (Hold).
AFC Enterprises Inc.
) recently declared its preliminary fourth quarter and full year
2012 results. The company projects its adjusted earnings per
share for the full year of 2012 to be within $1.23-$1.24, up from
99 cents in 2011. AFC also provided an optimistic outlook for
2013. AFC currently holds a Zacks Rank #2 (Buy).
Other restaurateurs, which are expected to perform well moving
Krispy Kreme Doughnuts, Inc.
Burger King Worldwide, Inc.
) both carry a Zacks Rank #2 (Buy), respectively.
AFC ENTERPRISES (AFCE): Free Stock Analysis
BURGER KING WWD (BKW): Free Stock Analysis
BUFFALO WLD WNG (BWLD): Free Stock Analysis
KRISPY KREME (KKD): Free Stock Analysis
To read this article on Zacks.com click here.