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Buffalo Wild Wings (BWLD) hosted its analyst day on August 16, giving investors a look at what the company has planned next. What were the highlights of the meeting, and what can shareholders expect from the company going forward?
Financial priorities to shareholders
The sports and chicken wing chain is in the midst of a transition period. It has a few new plans for investors to think about. Regarding the treatment of cash generation, the company made a statement that the board of directors is contemplating a cash dividend starting in 2017.
Growing the number of restaurants has been B-Dubs' strategy over the last five years. As a result, revenue has increased an average of 24% a year, and earnings per share at 20%. That growth strategy will now be balanced with returning value to shareholders. Including a possible dividend next year, the company just authorized an additional $300 million share-repurchase program.
The company expects to achieve these milestones by becoming more efficient financially. The balance sheet will be reworked with a new target line of credit capacity of $500 million, and the company will explore new term financing. This means that new location openings in the U.S. will be slower than in the past, but the chain is still targeting 15% a year earnings-per-share growth going forward.
It looks like the company is transitioning out of a high-growth business mode into one that's more focused on returning cash to shareholders, but that isn't saying that the company doesn't have some new initiatives in the works to keep expanding.
The evolving world of sports
Management talked a lot about the evolving world of sports, especially the digitization of the experience through social media and fantasy sports and the increasing popularity of video game sports. Even within the U.S., sports enthusiasts' tastes are undergoing changes with demographic shifts in the population.
Regarding the digitization of sports, management displayed a slide that compared basketball star Kevin Durant to young South Korean gamer Smeb. If you're wondering who that is, I'm with you. I also had not heard of Smeb prior to the B-Dubs presentation, and I'm a Millenial! The short explanation is that he is a League of Legends video game superstar in Korea.
The gist of the slide was to underline the change in how younger generations view sport. Wanting to stay true to its enthusiasm for all things sports, B-Dubs has been drawing attention to e-sports in recent years, and its investment in supporting the space is set to continue.
Soccer has also been gaining in popularity as the U.S. slowly starts to catch up with the rest of the world's frenzied obsession with the sport. B-Dubs has been hot on this trend, as well, focusing advertising attention to draw the soccer crowd in to watch matches. Whatever the popular sport of the season may be, Buffalo Wild Wings wants to be the place where enthusiasts go to watch and participate.
The love of sport abroad
Not content with the North American continent, Buffalo Wild Wings has begun to expand overseas. In fact, the company expects much of its new development going forward to occur outside the U.S., with 27 new international locations slated to open in 2017. Over the next 10 years, the company is targeting a total of 400 international restaurants.
The company has a good pipeline started in order to achieve its goal. In Mexico, the company is working with two franchisees to open a total of 36 locations, 12 of which are already open. In the United Arab Emirates, 12 locations are in the franchise agreement, with two already opened.
B-Dubs highlighted the Asian Pacific region as a future key to growth. First restaurants in India and Vietnam are scheduled to be opened next year, with a total of 15 and 10, respectively, under contract. Future development in the region will include China, Japan, and Australia.
Onward toward 3,000 restaurants worldwide
The company's long-term goal is to have a diversified portfolio of restaurant brands totaling 3,000 locations. Building the infrastructure to support that will take time. The company will also continue to rely on the franchise model to accomplish this feat.
To that end, the small fast-casual PizzaRev and R Taco chains will continue to be developed. B-Dubs management believes that it's time to begin offering franchisees another option and opportunities to expand. In combination, the two chains only total a few dozen locations in the U.S., but more of them are set to begin popping up soon.
The Buffalo Wild Wings brand is beginning to mature, but the company is building out a foundation for continued growth in the future. While new B-Dubs locations have much more limited upside in the U.S. than in the past, the company hopes that new dining concepts and the international community will be enough to keep the momentum going.
