Wild Wings Inc.
) third-quarter 2013 earnings of 95 cents per share beat the
Zacks Consensus Estimate of 86 cents by 10.5% and the comparable
year-ago quarter's earnings of 57 cents by 66.7%. The company's
higher top line and lower cost of sales percentage backed the
Total revenue increased 27.9% year over year to $315.8
million, surpassing the Zacks Consensus Estimate of $312 million
by 1.2%. Higher restaurant sales and solid unit growth drove the
revenues during the quarter.
Behind the Headline Number
During the third quarter, sales at the company-owned
restaurants were $295.7 million, up 29.5% year over year, driven
by 21% company-owned unit growth and comps growth.
Buffalo Wild Wings, which is popular among sports fans for its
dine-and-watch-games facility, registered company-owned comps
growth of 4.8% in the third quarter, lower than the year-ago
quarter's same-store sales of 6.2%. However, comps in the quarter
were higher than the second quarter's comps of 3.8%. Franchise
royalties and fees increased 9% year over year to $20.1 million,
led by 23 new restaurants in operation by the quarter-end and
3.9% rise in franchise same-store sales.
Buffalo Wild Wings' cost of sales, as a percentage of
revenues, declined 120 basis points (bps) to 30.0% in the third
quarter, benefiting from lower traditional chicken wing costs.
The restaurateur's recent effort of serving wings by portion also
helped lower cost of sales percentage by 40 bps.
The price of chicken wings has started to ease from the
beginning of the second quarter. Traditional wings prices were
$1.71 per pound in the second quarter, down 13% year over
Buffalo Wild Wings' operating margin expanded 200 bps to 8%,
driven by top-line growth and cost controlling initiatives.
During the quarter, Buffalo Wild Wings opened eight
company-owned restaurants and nine franchised restaurants. The
company currently operates 415 company-owned restaurants and 534
franchised restaurants across 49 states in the U.S. and
For the fourth quarter of 2013, Buffalo Wild Wings plans to
introduce 22 company-owned restaurants in the U.S. The company
also expects to launch 22 franchised units in the quarter in
North America. Apart from this, the company expects to introduce
two franchised units in Mexico.
The company expects net earnings growth of 20% in 2013, higher
than the prior estimate of 17%. Solid top-line growth, higher
comps and lower cost of sales percentage is expected to boost
earnings in 2013.
For the first four weeks of the fourth quarter, comps growth
was 5.3% and 3.0% at the company-operated restaurants and
franchised restaurants, respectively.
Buffalo Wild Wing expects to cross the 1,000 restaurants
landmark in the first quarter of 2014. Further, the company
intends to unveil 45 company-owned and 40 franchised units in the
domestic market in 2014. The company expects to record an
earnings growth of 20% in 2014.
Buffalo Wild Wings has succeeded in posting double-digit
top-line growth and higher earnings for the past two quarters. We
are encouraged by the company's strong market standing, new menu
launches, unit expansion and increased media exposure. Moreover,
Buffalo Wild Wings' association with NCAA will help it to
increase its visibility as a brand and attract customers through
digital and social media platform.
However, a limited consumer-spending environment continues to
be an overhang for the company.
Buffalo Wild Wings currently carries a Zacks Rank #3 (Hold).
Some other players in the restaurant industry which look
attractive at the current level include
Red Robin Gourmet Burgers Inc.
Cracker Barrel Old Country Store, Inc.
Bob Evans Farms, Inc.
). All of these companies carry a Zacks Rank #2 (Buy).
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