Buffalo Wild Wings (NASDAQ:BWLD) reported earnings yesterday after the closing bell. Overall growth continued at a rapid pace and the quarter looked clean. So, why is the stock down almost 10% today?
First, a recap of second-quarter results. Total sales, which include company-owned and franchised chains, grew 29.1% to $62.3 million. Comparable sales were up a strong 8.2% at company-owned stores and a still-decent 4.7% at franchisees. Diluted earnings growth was near the sales increase, up 27% for the quarter. There's nothing scary about those results.
CEO Sally Smith also provided an outlook. She guided third-quarter sales of $65 million to $66 million, same-store sales growth of 5% to 7% for company-owned and 3% to 5% for franchised stores, and diluted earnings of $0.28 to $0.31. Again, it looks like strong growth will continue into the next quarter.
Oh, wait, earnings guidance was a penny below what analysts were projecting for the third quarter, causing the stock sell-off for the day. Plus, there's been a certain amount of negative sentiment surrounding most casual dining restaurant stocks because of concerns that high gas prices and rising interest rates will push consumers to purchase groceries from Wal-Mart (NYSE:WMT) and Kroger (NYSE:KR) and eat at home, or eat at more pocketbook-friendly fast-food chains such as Wendy's (NYSE:WEN) or Burger King (NYSE:BKC)
Fools should be well-versed in using short-term market fluctuations in a stock to their advantage. Does the overall restaurant stock malaise or 10%-off sale on Buffalo Wild Wings warrant a buying opportunity?
Over the past five years, Buffalo Wild Wings has averaged annual sales growth of just over 30%, while earnings have grown 14% each year. With only a couple hundred million in annual sales and only 400 stores, the company should be able to continue to grow in the double digits. Additionally, the company has zero long-term debt because it's using internally generated operating cash flow to fund its expansion.
Shares of Buffalo Wild Wings aren't overly cheap and the restaurant industry is extremely competitive, so it's important for a Fool to estimate just how long this rapid growth can continue. I'll rely on Tom Gardner and his Motley FoolHidden Gems newsletter for further insight on this one.
For more wild Foolishness:
Buffalo Wild Wings is a Hidden Gems pick. Take the newsletter for a 30-day free trial .
Wal-Mart is an Inside Value pick.
Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email him with feedback or to discuss any companies mentioned further.
