Why Buffalo Wild Wings' Shares Cooled Off

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of wing-slinging restaurant Buffalo Wild Wings (Nasdaq: BWLD  ) were ice cold today, falling as much as 13% in intraday trading after the company announced second-quarter results.

So what: It's earnings season ,and that means that any company unfortunate enough to miss earnings expectations is bound to see its stock take a drubbing. And that's exactly what happened to Buffalo Wild Wings. Revenue for the second quarter increased 30% from last year, hitting $239 million. Earnings per share, meanwhile, clocked in at $0.62, up from $0.58 last year. Analysts, however, had been looking for per-share profit of $0.68 on revenue of $240 million.

Now what: Forget the rain: Blame it on the chicken wings. Prices for chicken wings -- not surprisingly a key input cost for B-Wild -- rose drastically from last year, putting pressure on the company's bottom line. Buffalo Wild Wings has tried to pass some of the costs through to customers with price increases, but that's a tough proposition when consumers aren't exactly feeling happy-go-lucky.

The good news here is that B-Wild's quarter showed that it's still a successful, growing restaurant chain despite the economy and its significant chicken challenges. On the other hand, unless the economy or chicken wing prices (or both) turn around soon, the headwinds could continue and may put more pressure on the stock.

Want to keep up to date on Buffalo Wild Wings? Add it to your Watchlist.

The Motley Fool owns shares of Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of and writing covered calls on Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool , or on Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 25, 2012, at 8:08 PM, mark516119966 wrote:

    I doubt that chicken prices will come down anytime soon with the drought we're experiencing.

    Rising chicken feed prices is a better bet.

    Our BWW just raised the price to $.50 per each wing. That folks, aint chicken feed. If this is the quarterly result after this price increase I'm not sure where they can go from here.

    Let's remember what this is after all, I don't know what their magic formula is but they better not loose it because that's close to the price of a taco. And many other items at fast food joints.

  • Report this Comment On July 25, 2012, at 8:20 PM, TMFKopp wrote:

    @mark

    When you say they "just" increased the price, what exactly do you mean by that? If "just" is within the past month, bear in mind that these results are for the quarter ending June 30. Any price increases put through post June 30 won't be reflected until the September quarter.

    Matt

  • Report this Comment On July 26, 2012, at 8:26 PM, mark516119966 wrote:

    Yes Matt, you're right it was a month or so it probably won't show yet. It is yet to be seen.

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