We maintain our Neutral recommendation on casual-dining
Buffalo Wild Wings Inc.
). While the company's strong brand name and expansion strategy
bode well for future growth, a limited international presence and
increasing operating expenses remain reasons for concern.
Reason behind the Reiteration
Minneapolis, Minn.-based Buffalo Wild Wings is famous for its
bar concept. Amid uncertain economic conditions, the company has
been posting positive comparable store sales (comps) for the past
eight quarters. Gaining from top-line growth, easing wing costs
in the upcoming quarters and proper labor management, the company
expects to achieve a net earnings growth of 25% in 2013, higher
than the prior-year growth of 17%.
Buffalo Wild Wings remains better-positioned than many of its
peers because of menu innovation, better food presentation and
operational efficiency. The company's 'guest experience business
model' and new unit design layout will invigorate its potential
as a brand and help augment its customer base, going forward.
In addition, the company's three-year collaboration with
National Collegiate Athletic Association (NCAA) will help it to
increase its visibility as a brand and attract customers through
digital and social media. Moreover, the company's recent
acquisition of the fast-casual pizza restaurant, PizzaRev will
likely help broaden Buffalo Wild Wings' reach in the U.S.
The Zacks Rank #3 (Hold) company is continuously trying to
expand its footprint worldwide. Buffalo Wild Wings, which owns,
operates, and franchises 891 casual dining restaurants worldwide,
though most of them are in the U.S. It has plans to achieve the
1,000-unit milestone by the end of 2013. The company also intends
to open 1,500 units over the next five to seven years.
Despite its strong domestic presence, the company seems to be
slow on the international front. We believe that it needs to
expand beyond the U.S. in order to offset the cut-throat
competition in the saturated domestic market.
Moreover, the company's sales driven initiatives will increase
its operating costs in 2013. Apart from this, we believe, the
implementation of the Affordable Care Act will drive the
company's overall costs further up, hurting its margins, going
ahead. For the time being, these factors keep us on the
Other Stocks to Consider
Some other restaurateurs worth considering are
CEC Entertainment Inc.
AFC Enterprises Inc.
BJ's Restaurants, Inc.
). While CEC Entertainment carries a Zacks Rank #1 (Strong Buy),
AFC Enterprises and BJ's Restaurants carry a Zacks Rank #2
AFC ENTERPRISES (AFCE): Free Stock Analysis
BJ'S RESTAURANT (BJRI): Free Stock Analysis
BUFFALO WLD WNG (BWLD): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
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