With March Madness on the Horizon, Is Buffalo Wild Wings a Timely Bet?

With March Madness rolling in, restaurant chain Buffalo Wild Wings looks poised for higher sales as an official sponsor of the tournament. Is the company a good bet for investors?

Mar 15, 2014 at 11:00AM


College basketball's popular tourney, more affectionately known as March Madness, is once again set to begin which is good news for sports-oriented restaurant chain Buffalo Wild Wings (NASDAQ:BWLD).  The company has put most of its eggs into catering to sports-crazed fans, which included inking a multi-year marketing partnership with the NCAA in 2012 to position itself as an official sponsor of the aforementioned tourney.  While Buffalo Wild Wings remains on a fast growth trajectory, its recent quarterly update was slightly below expectations on the top line which led to a short-lived stock price sell-off.  So, is Buffalo Wild Wings a good bet at current prices?

Bww Head Location

What's the value?
Unlike some sit-down restaurant operators that have struggled with stagnant customer volumes like Darden Restaurants, Buffalo Wild Wings has leveraged consumers' insatiable demand for sports to create a thriving chain of sports-oriented bar and grills which recently topped 1,000 locations nationwide.  The company's ability to successfully link wings, beer, and watching sports in the minds of its customers has positioned its restaurants as popular gathering spots, a trend that it has facilitated with open layouts and a bevy of televisions which cover every line of sight.  More importantly, the universal love of sports seems to present favorable future growth opportunities in international markets for Buffalo Wild Wings, and this is an area that the company has only begun to tap.

In fiscal 2013, Buffalo Wild Wings has remained on the fast track as it reported a 21.7% increase in its top line, aided by a comparable-store sales gain and a double-digit expansion of its overall store base.  Despite higher restaurant management costs which were due to efforts to enhance customer experiences, the company was able to maintain operating profitability in-line with the prior year, thanks to a notable decline in average chicken-wing prices.  As a result, Buffalo Wild Wings continued to generate healthy operating cash flow during the period which will power its plans for another double-digit increase in its store base in 2014.

Looking for cheaper themes
While Buffalo Wild Wings remains the king of wings, there is a growing list of challengers in the space that includes fast food kingpin McDonald's, which entered the category with its new Mighty Wings offering last September. Buffalo Wild Wings' results to-date seem to have been relatively unaffected by its competitors' forays, but rising competition will likely lead to higher future marketing expenses for the company which will put pressure on its underlying profit growth.  As such, Buffalo Wild Wings' relatively high valuation, evidenced by its 30-plus P/E multiple, should give investors some pause and lead them to search for greater value elsewhere in the themed-restaurant space.


One good alternative would be Cracker Barrel Old Country Store (NASDAQ:CBRL), a hybrid restaurant/retail concept that has leveraged consumers' nostalgia for the U.S.' country-western heritage into a national base of stores.  The company has also taken advantage of an increasingly mobile customer base by predominantly placing its stores near high-traffic freeway exits and travel spots.

While Cracker Barrel has a lower restaurant margin than Buffalo Wild Wings, it benefits from lower-cost word-of-mouth advertising which has allowed the company to generate a comparable level of operating profitability.  It also has a valuable retail operation that extends its restaurant's brand into the at-home market, a focus area for the company evidenced by product partnerships in the area that include a recent deal with meat-processing giant Smithfield Foods. 


Another good alternative in the space is Bloomin' Brands (NASDAQ:BLMN), a diversified restaurant operator that has leveraged interest in the Australian way of life to build a global chain of steakhouses that span nineteen countries.  Despite a generally down year for the sit-down restaurant business in 2013, according to data provider Knapp, Bloomin' Brands posted a comparable-store sales gain for its core Outback Steakhouse franchise as well as varying gains for each of its other concepts.  While the company's Outback Steakhouse concept may be approaching its upper limit in terms of its overall store base, its fast-growing Bonefish grill seafood concept looks capable of powering future profit growth and higher shareholder value.

The bottom line
Buffalo Wild Wings will undoubtedly be a popular dining choice for sports-crazed fans during this year's edition of March Madness. Given the growth expectations baked into its current stock price, though, prudent investors should look elsewhere for restaurant sector opportunities, starting with growing franchises like Cracker Barrel and Bloomin' Brands.

6 more stocks for ultimate growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Robert Hanley has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and McDonald's. The Motley Fool owns shares of Buffalo Wild Wings and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers