Buffalo Wild Wings Tops Consensus - Analyst Blog
April 29 2011 - 5:45AM
Zacks
Buffalo Wild Wings
Inc.’s (BWLD) first quarter 2011 earnings
of 81 cents per share exceeded the Zacks Consensus Estimate of 73
cents and increased 39.7% from 58 cents in the prior-year quarter.
The better-than-expected results were driven by higher same-store
sales growth and lower wing costs.
Total revenue climbed 19.6% year
over year to $182.2 million and outperformed the Zacks Consensus
Estimate of $177.0 million. Sales at company-operated restaurants
rose 20.0% to $165.5 million, fueled by 28 additional restaurants
in operation at the end of the quarter compared with the prior-year
quarter and a rise in same-store sales.
Franchise royalties and fees grew
16.2% year over year to $16.6 million, propelled by 58 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 3.9% and 1.6% at company-operated restaurants and franchised
restaurants, respectively.
Average weekly sales at
company-operated restaurants and franchised restaurants increased
7.8% and 2.4% from the prior-year quarter to $48,845 and $52,774,
respectively.
The Minneapolis, Minnesota-based
company’s restaurant operating margin perked up 360 basis points
(bp) to 21.5%, aided by a 270-bp contraction in cost of sales to
27.9% of restaurant sales arising from a 36% fall in cost of
traditional wings, 80-bp drop in operating costs to 14.8% and a
30-bp decrease in occupancy costs to 6.2%.
During the quarter, Buffalo Wild
Wings opened 4 company-owned restaurants and 15 franchise
restaurants.
Financial
Position
Buffalo Wild Wings ended the
quarter with cash and cash equivalents of $30.4 million and
shareholders’ equity of $273.8 million. As of March 27, 2011,
operating cash flow was $39.8 million.
Outlook
Buffalo Wild Wings plan to open 16
company-owned and 9 franchised restaurants in the second quarter
and 100 new restaurants in the year in order to achieve its target
of 13% unit growth for fiscal 2011.
Management expects comparable store
sales in April to increase 5.3% and 1.6% at company-operated
restaurants and franchised restaurants, respectively, indicating
positive signals for second quarter 2011.
The company is undertaking various
initiatives like menu innovations, remodeling of restaurants and
marketing investment to attract customers for the upcoming football
season including the NFL and college football program. The NFL
season is currently facing some disruptions. Should it get
cancelled, the company believes that it will be able to sustain its
net earnings growth target of more than 18% for fiscal 2011.
Our Take
The bar-and-grill restaurant chain
surpassed the Zacks Consensus Estimate for the first quarter of
2011 and expects the next quarter to be strong. Thus, estimates for
the next quarter are likely to increase in the coming days.
We remain encouraged by the
company’s long and successful track record, a viable business
strategy and a debt-free balance sheet. The company is also on
track to achieve 13% unit and 18% net earnings growth in fiscal
2011. Moreover, the company provides ample growth opportunities
given its targets to open 1,000 restaurants in the United States by
2013 and 50 in Canada by 2015.
However, we remain cautious on the
stock as competition among casual dining restaurants remains fierce
with respect to price, service, location and concept in order to
drive traffic. Moreover, same-store sales are expected to be
sluggish in the next quarter, as consumer spending remains low.
Hence, we have a Zacks #2 Rank,
which implies a short-term Buy rating on the stock. We also
reiterate our long-term Outperform recommendation.
One of Buffalo Wild Wings’ primary
competitors, BJ’s Restaurants, Inc. (BJRI)
reported first quarter 2011 adjusted earnings of 25 cents per
share, exceeding the Zacks Consensus Estimate of 19 cents driven by
strong comparable restaurant sales growth.
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BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
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