Shares of restaurant chain Buffalo Wild Wings
It's not as bad as it looks
While the results are far from horrible, they were nevertheless short of analysts' expectations.
For the quarter, the company reported a profit of $11.7 million, or $0.62 per share, up 6.9% over 2011. Revenue came in at $238.7 million, or 29.7% higher on a year-over-year basis. Analysts had their sights set on earnings of $0.68 a share and revenue of $240 million.
Same-store sales at company-owned and franchised locations increased 5.3% and 5.5%, respectively, and the chain added 53 new company-owned locations to its growing portfolio.
The biggest concern comes from rising commodity costs -- namely, chicken wings. For the quarter, the price of chicken wings averaged $1.90 a pound. This was 86% higher than the $1.02 paid by the company in the same quarter last year. As a result, cost of sales for company-owned stores increased to 31.6% of revenue compared to last year's 27.2%.
As Buffalo Wild Wings' chief financial officer, Mary Twinem, stated: "Our focus for the remainder of the year is on sales-driving initiatives and disciplined expense management. We are responding to commodity challenges with both menu price increases and marketing and operation strategies that will help lessen the bottom line impact in the near future and long term."
Prior to the announcement, shares in Buffalo Wild Wings were up 18% for the year. However, it appears that they'll relinquish the majority of those gains in today's trading.
Same dipping sauce, different day
The same story has been repeated across the industry this quarter.
Shares in Chipotle Mexican Grill
The one company to buck this trend, Panera Bread
Panera's president and co-CEO stated, "We are pleased to deliver 27% earnings growth in the second quarter, the ninth out of the last ten quarters where earnings growth has exceeded 20%. Our strong comparable sales growth in the quarter of 7.1% [for company owned restaurants] is the direct result of our past and current investments in the quality of our food, marketing, operations, and customer experience."
Foolish bottom line
Given the strong dollar and rising commodity prices due to the drought, some areas of the restaurant industry will struggle to best last year's results. While this may create opportunities, as I believe it has with Chipotle, it could also lead to losses for investors who aren't careful.
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Fool contributor John Maxfield does not own shares in any of the companies mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald's, Panera Bread, and Buffalo Wild Wings. Motley Fool newsletter services have recommended buying shares of Goldman Sachs, McDonald's, Buffalo Wild Wings, Chipotle Mexican Grill, and Panera Bread. Motley Fool newsletter services have also recommended writing covered calls on Buffalo Wild Wings. The Motley Fool has a disclosure policy.
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