Time to loosen your belts, Fools! Buffalo Wild Wings (NASDAQ:BWLD) announces third-quarter results Monday after the bell, so now's a great time to look back on both last quarter's results and what we should expect going into the report.
Analysts, on average, will be looking revenue to increase 18.3% year over year to $373.75 million, while earnings per share are expected to rise just 12.6% to $1.07. But this fast-growing chain is about much more than just those headline figures. Here are three more things I'll be watching closely.
Rising operating costs
Last quarter, Buffalo Wild Wings posted impressive 43.8% net earnings growth, but the stock got smacked when management said it expected earnings for the full year to be in the 25% to 30% range (Wall Street was forecasting roughly 34% growth). Potentially crimping that growth, executives explained, was a combination of adding higher-paid guest experience captains at 80 more company-owned locations, impending minimum wage increases in both Minnesota and California, and expected sequential increases in wing prices. Investors should keep a eye, then, on just how much of a negative effect those costs have on Buffalo Wild Wings' near-term earnings results. Even now, Wall Street still expects full-year 2014 earnings of $5 per share, representing roughly 32% growth over 2013.
Then again, Buffalo Wild Wings should be able to at least partially offset those cost increases thanks to last year's move away from fixed-quantity wing prices -- a decision made as the industry shifted toward larger birds. For example, Buffalo Wild Wings' current snack, small, medium, and large-sized portions afford it the ability to adjust the number of wings each customer receives to better align the price of the meal with its actual cost. But even then, Buffalo Wild Wings can only do so much without irking hungry consumers and sacrificing growth in same-store sales.
Speaking of which, three months ago Buffalo Wild Wings CEO Sally Smith noted comps for the first four weeks of the third quarter were about 8.2% and 7.4% at company-owned and franchised locations, respectively. That company-owned number included a 330-basis point benefit from the World Cup, but analysts' estimates indicate they're optimistic for Buffalo Wild Wings to maintain that momentum as the chain heads into its self-described "favorite time of the year": American football season.
Also potentially helping Buffalo Wild Wings along the way are its new customized entertainment tablets, which were first unveiled in March and, as of last quarter, had already been rolled out to 300 company-owned stores and 140 franchised locations. But that's also less than half its 1,000+ restaurant base. Part of the value proposition of these tablets are that they 1) increase the likelihood of repeat visits, 2) increase average check sizes by keeping diners at their tables longer, and 3) allow B-Dubs to achieve higher operational efficiency by testing options such as tablet-based payments and ordering. Watch for any updates not only on the progress of that rollout, but also whether Buffalo Wild Wings is seeing any measurable benefit to same-store sales.
Progess in emerging restaurant concepts
Finally, listen for any updates on Buffalo Wild Wings' emerging restaurant concepts. During last quarter's conference call, the company said it made an additional $3 million equity investment to boost its minority stake in fast-casual chain PizzaRev. Only a few weeks later, the company announced it had purchased a majority stake in Rusty Taco, a popular Dallas-based street taco chain. Better yet, Buffalo Wild Wings has outlined plans for investing in as many as three more concepts going forward.
In each case, Buffalo Wild Wings believes these concepts have the potential to be scaled nationwide, thereby helping achieve its vision of becoming a 3,000-restaurant company comprised of a global portfolio of diversified brands. I'll be listening closely during the earnings call, then, for any hints of what's to come.