Buffalo Wild Wings' 4Q Results Beat - Analyst Blog
February 08 2012 - 5:45AM
Zacks
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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