Buffalo Wild Wings Stays Neutral - Analyst Blog
April 19 2013 - 1:50PM
Zacks
We maintain our Neutral recommendation on casual dining
restaurants chain Buffalo Wild Wings Inc. (BWLD).
While we prefer the company’s strong brand potential and ongoing
expansion strategy, an uncertain economic condition and cost
inflation keeps us on the sidelines at the current level.
Why the Reiteration?
Buffalo Wild Wings, one of the most recognized casual dining has
been consistently witnessing positive company-owned restaurants’
comparable store sales (comps) of 0.6%, 6.1% and 6.6%, respectively
in the past three years, which validates that it was unruffled by
the economic slowdown. Buffalo Wild Wings is well positioned to
sustain its comps growth in 2013, driven by improved guest
traffic.
Buffalo Wild Wings is continuously investing in its food and
beverages lineup to drive traffic as well as sales. In addition,
the company’s various proactive initiatives such as menu
innovation, increasing focus on Happy Hour, advertising
initiatives, operating enhancements, remodeling program and
technology upgrades continue to spur growth.
Buffalo Wild Wings also remains committed in its goal to
continuously expand its business worldwide. The company opened 85
and 74 new restaurants in 2011 and 2012, respectively and achieved
a unit growth of 11.6% in 2011 and 9.1% in 2012 and it plans to
unveil nearly 100 units in 2013. Buffalo Wild Wings is also
striving hard to expand its presence beyond the U.S.
Currently, more than 57% of the company’s total restaurants are
franchised, which is expected to provide a boost to its earnings
per share growth and ROE expansion. With its enhanced productivity,
the company now expects net earnings growth of 25% in 2013, higher
than the prior year growth of 17%.
However, higher food costs and macroeconomic pressure can act as
headwinds to its growth story. Continuous increase in wing costs
remains a major headwind for 2013, thereby affecting the
profitability of Buffalo Wild Wings.
Moreover, consumers in the U.S. are burdened with higher
gasoline prices, a 2% payroll tax increase and delayed tax refund
checks. These external forces might restrict consumers’
discretionary spending further, which in turn can put pressure on
the company’s sales.
Hence, at the current level, we remain cautious and prefer to
take a wait and see approach till we find some greater evidence of
an outperformance.
Buffalo Wild Wings carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other restaurant industry stocks with a favorable Zacks
Rank include Red Robin Gourmet Burgers Inc. (RRGB)
, Burger King Worldwide Inc. (BKW) and
Cracker Barrel Old Country Store Inc. (CBRL).
While Red Robin and Cracker Barrel carry a Zacks Rank #1 (Strong
Buy), Burger King carries a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis Report
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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