Buffalo Wild Wings (Nasdaq: BWLD) supposedly gave investors spicy tidings to chew on in its second-quarter financial results, but today's avid buyers might suffer indigestion tomorrow.
Second-quarter net income surged 31.4%, to $9.2 million, or $0.50 per share. Revenue increased 12.4%, to $145.7 million. However, same-store sales decreased 0.1% at company-owned stores, and slid 0.7% at franchised restaurants.
Last quarter, Buffalo Wild Wings shares took quite a beating following similar tidings on its same-restaurant sales. This time around, investors seemed to heave a collective sigh of relief that comps were flat, and that earnings beat analysts' expectation for a $0.42-per-share profit.
Investors should be wary, though. The recent World Cup fever helped Buffalo Wild Wings increase its sales, since folks gathered to watch the matches (as well as the NHL and NBA finals). Buffalo Wild Wings' profit also got a boost from the falling cost of chicken wings. Investors ought to investigate whether these factors are sustainable or merely temporary -- and keep an eye on those dormant comps as well.
Recent quarterly tidings from Panera (Nasdaq: PNRA), McDonald's (NYSE: MCD), and Chipotle (NYSE: CMG) looked more heartening. All three managed to increase same-store sales by appetizing amounts. However, Yum! Brands (NYSE: YUM) might be a bit of a bummer, given rising labor costs in China and the possibility of commodity inflation. When perusing Wall Street's menu of fast-food or cheap-eats restaurant stocks, investors should be choosy.
Buffalo Wild Wings trades at 18 times forward earnings, cheaper than Panera and Chipotle. Although B-Wild's press release trumpeted positive same-store sales for the month to date, investors should probably wait for more encouraging signs -- perhaps a full quarter of same-store gains, instead of the "less-bad" quarterly news we recently received.
Restaurants face a tough and highly competitive environment on the whole. The sector holds tastier stocks than B-Wild for investors to nibble on.
