Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Buffalo Wild Wings (BWLD) jumped more than 12% Tuesday after the popular restaurant chain announced better-than-expected third-quarter earnings and encouraging forward guidance.
So what: Quarterly revenue rose 18.3% to $373.5 million, helped by a combination of new locations, menu price increases taken over the past year, and comparable-store sales growth of 6% and 5.7% at company-owned and franchised restaurants, respectively. This translated to a 20% increase in earnings per diluted share to $1.14. Analysts were only looking for earnings of $1.07 per share on sales of $373.75 million.
Going forward, Buffalo Wild Wings now sees 2014 earnings growth exceeding 28% over last year, compared to their previous guidance range for earnings growth to exceed 25% and possibly reach 30%. Analysts were technically hoping for earnings to grow by 31.7%, but this narrowed range is much easier for investors to swallow given Buffalo Wild Wings propensity to underpromise and overdeliver. Buffalo Wild Wings also forecast 2015 earnings growth of 18% -- or roughly inline with expectations.
Now what: B-Dubs guidance also comes even as the company has seen traditional wing prices jump more than 30% sequentially to $1.98 per pound. Combine that with impending minimum wage increases in several states, and it's no surprise Buffalo Wild Wings announced it will implement a 3% menu price increase at the end of November. Whether Buffalo Wild Wings has the pricing power to do so without sacrificing same-store sales remains to be seen. But I like its chances given the flexibility it afforded itself last year by implementing a new volume-based wing price structure. For now, B-Dubs' Q3 results were undeniably strong, and I can't blame the market for bidding up shares today.
