The casual dining restaurant chain,
Buffalo Wild Wings Inc.
) first-quarter 2013 earnings of 87 cents per share missed the
Zacks Consensus Estimate of 99 cents per share by 12.1% and the
comparable year-ago quarter's earnings by 11.2%.
Earnings in the quarter were under pressure due to growing
wing prices, inconsistent wing yields and higher cost incurred
due to the launch of new Guest Experience model.
Total revenue climbed 21.2% year over year to $304.4 million,
slightly below the Zacks Consensus Estimate of $305 million.
Quarterly revenues were driven by higher guest count and unit
Behind the Headline Number
During the first quarter, sales at the company-operated
restaurants surged 22.4% to $284.4 million, fueled by new unit
openings as well as higher comps. Amid sluggish industry sales,
Buffalo Wild Wings has succeeded to register positive same-store
sales of 1.4% at its company-owned restaurants. However, it was
far below the year-ago quarter's same-store sales growth of
The restaurant chain is popular among sports fans for
its dine-and-watch-games facility. The time shift of the National
Football League has, therefore, adversely impacted the company's
same-store sales during the quarter.
Franchise royalties and fees jumped 6.0% year over year to
$19.9 million, thanks to nine additional restaurants in operation
by the end of the quarter and a 2.2% improvement in same-store
Buffalo Wild Wings' operating margin contracted 350 basis
points (bps) to 7.2% as its cost of sales, labor costs and
operating expenses went up 160 bps, 80 bps and 40 bps to 32.7%,
30.2% and 14.5%, respectively. The introduction of new
sales-driven Guest Experience model has also pulled down the
margin during the quarter through raising costs.
During the quarter, Buffalo Wild Wings opened 16 new
company-owned restaurants and four franchised restaurants. The
company currently operates 397 company-owned restaurants and 514
In the second quarter of 2013, Buffalo Wild Wings plans to
introduce nine new company-owned restaurants in North America.
The company also expects to launch 12 franchised units in the
Management expects comparable sales (comps) growth of 5.2% and
5.8% at the company-operated restaurants and franchised
restaurants, respectively, for the first four-week period of the
second quarter of 2013.
Buffalo Wild Wings is undertaking various initiatives like
menu as well as technological innovations, restaurant upgradation
and boosting advertising spending. With its multi-year agreement
with National Collegiate Athletic Association (NCAA), the company
will focus more on its marketing and promotion to attract
In order to augment its profit, Buffalo Wild Wings is also
trying to diligently reduce its labor cost. Moreover, moderated
wings cost is expected to be beneficial for Buffalo Wild Wings'
margin. Taking these into account, the company now expects net
earnings growth of 25% in 2013, higher than the prior-year growth
Minneapolis, MN-based Buffalo Wild Wings continues to struggle
in terms of profit due to higher wings costs. In addition to
this, the restaurant chain is witnessing declining comps due to
weak industry sales. Stiff competition and a tepid macroeconomic
outlook, which might affect footfall at the restaurants, are
expected to remain headwinds in the coming quarters.
However, the company's top-line growth and unit expansion is
quite impressive. Moreover, Buffalo Wild Wings' expectation
of a 25% net earnings growth in 2013 even after a soft
first-quarter brings a ray of hope for this Zacks Rank #2 (Buy)
Some other restaurateurs like
) missed our estimates on both lines this season while
Yum! Brands Inc.
) beat earnings but missed out on revenues. Another company,
The Cheesecake Factory Inc.
) was ahead of the estimates on both counts.
BUFFALO WLD WNG (BWLD): Free Stock Analysis
CHEESECAKE FACT (CAKE): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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