Shares of the casual dining restaurant chain, Buffalo Wild Wings Inc. (BWLD), reached a new 52-week high of $106.03 on Jul 12, following consistent decline in prices of its main material, chicken wings.
The closing price of Buffalo Wild Wings on July 12 was $104.96, representing a solid 1-year return of about 25.2% and year-to-date return of about 43.8%. Average volume of shares traded over the last three months stands at approximately 423K.
Growth Drivers
After witnessing high wing costs even as late as the first quarter of 2013, Buffalo Wild Wings’ premium wings prices are now easing. During the first quarter conference call, the company stated that the average price of chicken wing was $1.75 per pound in the first two months of the second quarter, down nearly 7.9% from the comparable year-ago period. The wing price is also expected to go further down in the coming quarters, thus, boosting profitability.
Amid uncertain economic conditions, Buffalo Wild Wings has been posting positive comparable store sales (comps) for the past eight quarters, driven by unit expansion and higher guest counts. The company is also taking a series of initiatives to further boost its comps in the ensuing quarters.
With a consistent fall in wing costs, Buffalo Wild Wings is now making an effort to reduce the risk associated with inconsistent wing yields. The company has decided to change its traditional menu servings and serve wings based on its weight, rather than by its numbers. This initiative, slated to start in the third quarter of 2013, will help the company to serve a consistent portion of chicken wings to its customers.
Buffalo Wild Wings, famous for its ‘dine and watch the game’ concept, is highly benefitting from its three-year collaboration with National Collegiate Athletic Association (NCAA). The partnership allowed the company to be an official marketing as well as hangout partner for all NCAA sport events through 2016. This association will help the restaurant chain to increase its visibility as a brand and attract customers through digital and social media platform.
The company plans to unveil nearly 100 units in 2013 in its attempt to achieve the 1,000-unit milestone by the end of this year. Gaining from the higher top line, easing wing costs and proper labor management, Buffalo Wild Wings expects to achieve net earnings growth of 25% in 2013, higher than the prior-year growth of 17%.
Buffalo Wild Wings is expected to report its second-quarter 2013 earnings on Jul 30. The Zacks Consensus Estimate for the quarter at the moment is 78 cents per share. With a Zacks Rank #3 (Hold) and positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of 2.56%, the company is expected to beat the Zacks Consensus Estimate in the second quarter of 2013.
Some other restaurateurs that are likely to perform well include BJ's Restaurants, Inc. (BJRI), AFC Enterprises Inc. (AFCE) and The Cheesecake Factory Inc. (CAKE). All these companies carry a Zacks Rank #2 (Buy).
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