Monday, February 23, 2009

Buffalo Wild Wings (BWLD) with Saucy Report

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We're still playing catch up with numerous earning reports from the past few weeks; one name to highlight is restaurant Buffalo Wild Wings (BWLD). We were an owner of this stock for a short period last summer [Aug 11: Starting Buffalo Wild Wings Position] to early fall, entering around $36 and exiting around $36.

Panera Bread (PNRA) and Buffalo Wild Wings (BWLD) are both favorite places to eat, are reasonable cost places to eat for those who don't want just "fast food" and now have excellent charts. Both look like good purchases for the fund, and I've owned both these over the years in personal account, but I went with the latter - it's a bit more expensive but a higher growth rate and less saturated across the U.S


I continue to like this niche as people "move down" the (ahem) food chain into cheaper restaurant fare; this is also a place the McDonald's crowd can go to when they want something more traditional in terms of "sit down" experience. The price point fits both crowds. The company put out good results and solid guidance, and when compared to peers "solid" looks spectacular. The stock skyrocketed higher but even with this tremendous jump is quite a bit below where we sold out. Which just goes to show, even if you are "right" in a bear market (on a fundamental basis) it means very little. Anyone who stuck it through believing the thesis (which was not incorrect) sat on a huge unrealized loss, which is now just a medium unrealized loss. But it still is nice to see the thesis prove to be correct.

Let's see what they had to say that was so exciting.

Via AP
  • Buffalo Wild Wings Inc. on Wednesday reported a 29 percent jump in its fourth-quarter profit that beat Wall Street's expectations. The restaurant chain said it earned $7.7 million, or 43 cents per share, up from $6 million, or 34 cents per share, in the same quarter last year. Revenue increased 32.6 percent to $121.2 million from $91.4 million.
  • When Buffalo Wild Wings reported its results on Wednesday, the Minneapolis-based company said its same-store sales increased 4.5 percent at company-owned restaurants and 2.5 percent at franchised restaurants during the quarter.
  • Buffalo Wild has also been benefitting from favorable chicken wing prices. Chicken wings made up about a fifth of the company's costs.
  • In a note to clients, Jefferies & Co. analyst Jeff Farmer said same-store sales in the first quarter to date are already "off to a huge start" -- up over 8 percent -- "easily the best in casual dining." Farmer cited the company's strong brand and improved operations. Additionally, while wing prices have risen, the company has boosted prices on its menu to help offset the cost. "Buffalo Wild Wings has delivered and will likely continue to deliver the best same-store sales, traffic and new unit productivity in the casual dining sector," Farmer said.
  • The company currently operates 567 Buffalo Wild Wings locations across 39 states
Guidance
  • Coming off a strong fourth-quarter earnings report, Buffalo Wild Wings on Wednesday announced significant growth goals for 2009. The Minneapolis-based restaurant chain said it expects to increase its revenue by 25 percent and net income by 20 to 25 percent during the year. The company said its goals are achievable and it is already on the path with first-quarter same-store sales growing 8 percent at company-owned restaurants and a 7 percent increase at franchised locations.
While there is now a gap in the chart, I'd not chase something like this to the short side (on a technical basis) until I see it roll over and start to fill the gap created post earnings. Fundamentally however, if one has to buy consumer discretionary this is one of the few alluring names.

No position

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