Buffalo Wild Wings Inc.
's (
BWLD
) the owner, operator, and franchiser of restaurants reported solid
fourth quarter 2011 results and reaffirmed its outlook, leading to
share upside of nearly 2% in the regular session, but surging 15%
in after-hours trading.
The restaurant operator reported fourth quarter earnings of 73
cents per share, surpassing the Zacks Consensus Estimate of 67
cents per share and also jumping 32.7% from the year-ago quarter
earnings of 55 cents per share. The better-than-expected results
were driven chiefly by strong top-line growth and unit growth.
Total revenue soared 34.5% year over year to $220.5 million and
outperformed the Zacks Consensus Estimate of $210.0 million. Sales
at the company-operated restaurants rose 36.4% to $202.9 million,
fueled by 60 new restaurants going into operation at the end of the
quarter compared with the prior-year quarter and higher same-store
sales.
In full year 2011, the company reported earnings of $50.4
million, or $2.73 per share, versus $38.4 million, or $2.10 per
share, in the prior year. Total revenue grew 28% to $784.5
million.
Quarter Performance
Franchise royalties and fees grew 15.3% year over year to $17.5
million, propelled by 25 additional restaurants in operation at the
end of the quarter compared with the year-ago quarter and an
improvement in comps. Same-store sales spiked 8.9% and 5.9% at the
company-operated restaurants and franchised restaurants,
respectively.
Average weekly sales at the company-operated restaurants and
franchised restaurants increased 14.0% and 7.1%, respectively, from
the prior-year quarter to $51,983 and $53,385.
The Minneapolis, Minnesota-based company's restaurant operating
margin expanded 10 basis points (bp) to 19.3%, aided by a 10-bp
drop in operating costs to 15.5% (as a percentage of restaurant
sales), a 60-bp fall in operating costs to 5.9% and flat labor cost
to 29.9, partially offset by a 60-bp hike in cost of sales to
29.4%.
Store Update
During the quarter, Buffalo Wild Wings opened 18 new
company-owned restaurants in North America and purchased 15
franchised locations. The company also closed 2 company-owned
locations. Buffalo Wild Wings currently operates 319 company-owned
restaurants and 498 franchised restaurants.
In the first quarter of 2012, the company plans to open around
10 company-owned restaurants in North America, which includes one
location in Toronto. The franchisees are also expected to open
another 10 restaurants during the quarter.
Financial Position
Buffalo Wild Wings ended 2011 with cash and cash equivalents of
$20.5 million and shareholders' equity of $318.0 million.
Outlook
Management witnessed comparable sales growth of 12.9% and 10.8%
at the company-operated restaurants and franchised restaurants,
respectively, for the first six-week period of the first quarter of
2012, indicating positive signals for the upcoming quarter. The
company is also undertaking various initiatives like menu
innovations, remodeling of restaurants, marketing investment and
media spending to attract customers. Additionally to drive traffic,
the company will also begin online ordering facility.
Moreover, management continues to remain optimistic for 2012
based on unit and sales growth and a benefit of an extra week of
operation. The company reaffirmed its unit growth target of 12% and
net earnings growth of 20% for 2012.
Our Take
We remain encouraged by the company's long and successful track
record, viable business strategy and debt-free balance sheet. The
company is also on track to achieve 12% unit and 20% net earnings
growth for fiscal 2012. 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, we remain cautious on the stock based on soaring
wing prices, lower consumer spending and intense competition
among casual dining restaurants with respect to price, service,
location and concept in order to drive traffic.
Hence, the company holds a Zacks #3 Rank, which implies a
short-term Hold rating on the stock. We also reiterate our
long-term Neutral recommendation.
One of Buffalo Wild Wings' primary competitors,
BJ's Restaurants, Inc.
(
BJRI
) is slated to release its fourth quarter results on February 8,
2012. It's other peer company
Chipotle Mexican Grill Inc.
(
CMG
) reported fourth-quarter 2011 earnings of $1.81 per share, missing
the Zacks Consensus Estimate by 2 cents but improving from the
year-earlier earnings of $1.47.
BJ'S RESTAURANT (
BJRI
): Free Stock Analysis Report
BUFFALO WLD WNG (
BWLD
): Free Stock Analysis Report
CHIPOTLE MEXICN (
CMG
): Free Stock Analysis Report
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