Bwld

Credit: Buffalo Wild Wings.

Buffalo Wild Wings (NASDAQ:BWLD) served up third-quarter 2015 results Wednesday after the market close. With shares of the wings, beer, and sports-centric restaurant chain down more than 14% after-hours trading, suffice it to say it left a bad taste in the market's mouth.

Let's dig in to see what happened.

The headline numbers
Quarterly revenue rose 22% year over year to $455.5 million, including a 3.6% increase in franchise and royalty fees to $23.8 million, and a 23.2% increase in sales from company-owned restaurants to $431.8 million. Same-store sales grew 3.9% and 1.2% at company-owned and franchised locations, respectively. At the same time, Buffalo Wild Wings CEO Sally Smith was quick to point out that this growth occurred despite a shift in the sports calendar, which resulted in one less week of football and fewer pay-per-view events than in the same year-ago period. Without that shift, Buffalo Wild Wings estimates that same-store sales would have 80 basis points higher -- a more severe negative influence than the 50-basis-point impact management predicted during last quarter's call. 

Trending toward the bottom line, cost of sales rose 24.5% year over year to about 29.4% of restaurant sales, up from 29.1% in last year's second quarter, and driven in part by higher-than-expected prices for traditional wings. The flagship menu item cost Buffalo Wild Wings $1.79 per pound in Q3, or a 19% increase over the same period last year. Even so, keep in mind that's another sequential deceleration from last quarter's 26% year-over-year increase.

Cost of labor also climbed 24.1% year over year to roughly 32.2% of restaurant sales, up from 31.9% last year, thanks to minimum-wage increases and the addition of higher-paid Guest Experience Captains at all company-owned locations. As a result, and combined with a negative-$0.13-per-share impact from incremental costs related to Buffalo Wild Wings' now-closed acquisition of 41 franchised restaurants, earnings per diluted share for the quarter fell 12.3% year over year to $1.00. 

For perspective, Buffalo Wild Wings hadn't provided specific revenue and earnings guidance for the third quarter. But it's obvious Buffalo Wild Wings was hoping for more, and consensus estimates predicted significantly higher revenue and earnings of $465 million and $1.29 per share, respectively.

Looking forward
The pain didn't stop there. Same-store sales for the first four weeks of the fourth quarter rose a modest 2.8% at company-owned locations, and 0.8% a franchised restaurants. In light of these early results -- and keeping in mind Buffalo Wild Wings understandably reduced its goal last quarter for 2015 net earnings growth to be 13% in light of franchise acquisition costs -- Buffalo Wild Wings now expects 2015 earnings to increase in the single-digit percentage range from last year.

To their credit, Buffalo Wild Wings did offer a light at the end of the tunnel with a preliminary look at 2016. Thanks to a combination of continued investments in the guest experience, and anticipated B-Dubs unit growth, operational initiatives, and continued early-stage expansion of its R Taco and PizzaRev concepts, Buffalo Wild Wings now expects that earnings growth in 2016 should exceed 20%.

Of course, that's little consolation for investors today, as Buffalo Wild Wings effectively lowered the bar from which that growth will be achieved. So while Buffalo Wild Wings' long-term growth potential remains immense -- it still intends to eventually almost triple its number of restaurants from 1,142 at the end of the quarter to 3,000 worldwide -- it's no surprise that our short-term-oriented market swept shares in the trash on Wednesday.

Steve Symington owns shares of Buffalo Wild Wings. The Motley Fool owns shares of and recommends Buffalo Wild Wings. 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.