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Buffalo Wild Wings Takes a Dive: Is the Stock a Buy?

http://www.fool.com/investing/general/2013/04/30/buffalo-wild-wings-takes-a-dive-is-the-stock-a-buy.aspx

Steve Symington
April 30, 2013

Though shares of Buffalo Wild Wings (NASDAQ: BWLD) rose more than 4% in Monday's after-hours trading following a strong quarterly report from the company, the stock fell into a tailspin Tuesday morning after a pair of analyst downgrades stemmed investors' excitement.

Sure enough, while Deutsche Bank raised its price target on the firm to $105 from $95 per share, the market drove shares of B-Wild down more than 4% after analysts at both Sterne Agee and KeyBanc downgraded the stock to "neutral" from "buy."

Image source: Buffalo Wild Wings

So what's an investor to do? 

The numbers
For the first quarter, while revenue increased 21.2% from the year-ago period to $304.4 million, B-Wild's net earnings actually decreased 10.2% year over year to $16.4 million. Earnings per diluted share also fell 11.2% to $0.87.

Meanwhile, same-store sales increased 1.4% at Buffalo Wild Wings' company-owned restaurants and 2.2% at franchised locations. While that still fell short of fast-casual competitor Panera Bread (NASDAQ: PNRA), which posted company-owned same-store sales growth of 3.3%, CEO Sally Smith reminded investors that her company still outpaced the negative same-store sales trend prominent in the casual-dining category as a whole. What's more, remember that in February, B-Wild management had said same-store sales for the first six weeks of Q1 were down 2.8%, so ending Q1 in positive territory reflected a huge improvement for the chain.

Going forward
Even better, comparable sales have been even stronger so far in the second quarter and currently stand at 5.2% and 5.8% for company-owned and franchise restaurants, respectively.

Even even better, while first-quarter wing costs remained frustratingly high, management also stated that it's finally seeing some moderation in prices, as the company expects to pay an average of $1.75 per pound in April and May. For those of you keeping track, that's nearly 17% lower on a sequential basis, and nearly 8% less than their cost around th