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If you owned shares of Buffalo Wild Wings (NASDAQ: BWLD ) , Chuy's (NASDAQ: CHUY ) , or Chipotle Mexican Grill (NYSE: CMG ) in 2013, you crushed it, and during one of the best years in the U.S. stock market's history:
The question for investors today: Did these stocks get ahead of the company's performance, or is there more room to run? Let's take a closer look.
The second coming of YUM!?
Chipotle made news in 2013 with talk of two new concepts to expand beyond the core Chipotle brand, giving some investors dreams of another decade-plus of sustained big growth. The first, Shophouse Southeast Asian Kitchen, was first introduced in 2012, but expansion has only just begun, with six locations open and a handful more set to open in early 2014. The brand-new Pizzeria Locale, in partnership with Denver restaurateurs Bobby Stuckey and Lachlan Mackinnon-Patterson, consists of a single location in Denver so far.
While both concepts offer tremendous potential, CEO Steve Ells has stated numerous times over the past year that the core Chipotle brand will remain the key growth driver for the foreseeable future. Ells did talk about why Pizzeria Locale makes sense for Chipotle during the company's ICR XCHANGE presentation two weeks ago:
...and when they (Stuckey & Mackinnon-Patterson) opened up this pizzeria, I knew that this had the makings for a pizzeria that could fit within the Chipotle format ... delicious food prepared individually for the customer, with a high throughput model that would have similar economics to Chipotle ... A lot of the pizza out there, most of it (pizza) is pizza that is cheaper ingredients, heavily discounted; very much a fast food model. This concept is completely different ... I see an extraordinary opportunity to offer very high quality, neapolitan style pizza within the Chipotle format and economic model.
With Q4 earnings tomorrow, it's unlikely we will learn anything more detailed about the company's plans for expansion, but the annual meeting later this year could bring more insight on these new concepts.
More growth to come
After opening its 1,001st restaurant just this week (in Mexico, actually), it's easy to think that Buffalo Wild Wings is all out of places to expand. But as CEO Sally Smith noted in the press release, "We've come a long way from being a small but well-loved chicken wing restaurant in Ohio, to sharing our passion for wings, beer and sports with eager Guests throughout North America - and soon, across the globe."
This is a reminder that the company's future expansion plans -- which will still largely depend on N. America -- are still far from complete. In the Q3 earnings announcement in October, Smith restated the company's goal of 1,700 locations in Canada and the U.S., and that more than 50 global locations (44 in U.S. and Canada) would be opened in the first quarter of 2014. At that rate, the company could reach 1,700 locations in less than four years. One of the best parts of the story for Buffalo Wild Wings? The growth, like Chipotle, expands beyond the new locations, as comparable sales growth is better than 4% on average at company-owned and franchise locations.
Something new to Chuy on
The company's motto, "If you've seen one Chuy's ... you've seen one Chuy's," is a reminder that this is a new and different concept, and the first of its kind to be taken to a national scale. While most restaurants focus on the average check and try to increase it, Chuy's has done amazing things at keeping its costs low, and almost prides itself on its average check of less than $14 per customer, which is incredibly low for a full-service, sit down restaurant. Incredibly, Chuy's locations generate strong revenues even with such low prices, with an average annual sales volume of $4.9 million, nearly double that of competitor On the Border's $2.7 million, and higher than Olive Garden, PF Chang's, and Texas Roadhouse, all of which get at least 14% more per check.
With only 48 locations open so far, Chuy's has a very long runway ahead of it, with plans to open 10 or more locations in 2014, and a stated target of 20% annual restaurant growth. Factor in the company's consistent comparable sales growth, and Chuy's should be able to grow by 20% to 25% annually for the foreseeable future.
Final thoughts: Keep the long view
Let's face it: There's no guarantees that 2014 will be a market-beating year for any company, including these three. There are too many unknowable factors that can affect the short term. However, what we can do is invest in great companies for the long-term, where all those unknowables tent to have less impact, and the company performance wins out.
For these three, that most likely means many more years of continued growth and profits, and that usually adds up to fantastic returns for patient investors who don't get too caught up in the short-term stuff. If you want to learn more, Chipotle reports earnings tomorrow, while Buffalo Wild Wings reports on February 4. Chuy's hasn't announced when it will hold its next earnings call, but it announced on February 25 last year.
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